Tax Essentials

The general information provided on this page is not a complete and exhaustive guide to the UK Tax System. Therefore it should not in any way be taken as advice on your personal circumstances. Please book an appointment with one of our tax or accounting professionals for specific advice regarding your situation.

 
This page contains a brief overview of all the key tax rates, limits, and allowances you need to know for the 2023/24 tax year.

Please note it is taxable income which applies in this assessment, including earnings, pensions in payment, cash interest, fixed interest income, dividends and rent. ISA income is not included.

Allowance2023/24
Personal Allowance£12,570
Transferable tax allowance for married couples/civil partners£1,260
Personal Savings Allowance (PSA)£1,000 for Basic rate taxpayers
£500 for Higher rate taxpayers
Not available for Additional rate taxpayers
Dividend Allowance£1,000

A Married Couple’s allowance (born pre 6/4/1935) or Blind Person’s allowance may also apply.

The transferrable tax allowance only applies where neither individual is a higher or additional rate tax payer. The maximum tax reduction available is £252.

The personal allowance reduces by £1 for every £2 of income above £100,000. The personal allowance is lost if taxable income exceeds £125,140 (2023/24).

The dividend and personal savings allowance apply after the personal allowance and are calculated using UK, not Scottish, rates. Anything within these allowances still count towards the basic and/or higher rate tax bands.

UK excluding Scottish Earned or Pension Income


RateTax BandIncome tax rateDividend tax rate
Starting Rate for Savings£1 – £5,0000%N/A
Basic rate£1 – £37,70020%8.75%
Higher Rate£37,701 – £125,14040%33.75%
Additional Rate£125,140+45%39.35%

Higher rate threshold (standard personal allowance + basic rate band) is £50,270.

Non-savings income uses up the starting rate for savings.

Scotland only

Scottish tax bands only apply to earned or pension income. They do not apply to savings or dividend income.

RateTax BandIncome tax rate
Starter Rate£1 – £2,16219%
Basic rate£2,163 – £13,11820%
Intermediate Rate£13,119 – £31,09221%
Higher Rate£31,093 – £125,14042%
Top Rate£125,140+47%

Higher rate threshold (Standard personal allowance + basic rate band) is £43,662.

CGT is charged on any profits (the ‘gains’) you make when you sell (or transfer) shares and unit trusts or other assets such as a second home. If the total of any gains realised in the year, minus any losses, exceeds your annual allowance the excess is liable to CGT.

CGT has a different tax rate depending upon whether it applies to business assets or non-business assets.

Annual capital gains tax allowance: £6,000 2023/24

2023/24 Capital gains tax rates (non-business assets)

Capital gainsTax rate
Gains which when added to taxable income fall in the UK basic rate tax band10%
Gains which when added to taxable income fall in the UK higher or UK additional rate tax band20%

Capital gains on residential property which is not a main residence will be taxed at 18% and 28% instead of 10% and 20%.

Business Asset Disposal Relief

Business assets are generally a share (or interest) in the company or firm you work for. Business Asset Disposal Relief is subject to meeting certain criteria – PLEASE VISIT THE HMRC WEBSITE FOR MORE INFORMATION

Value of estateTax rate
£1 – £325,000 (known as IHT threshold or nil rate band)0%
Over £325,00040%
Tax yearResidence nil rate band
2020/21£150,000
2021/22£175,000
2022/23£175,000
2023/24£175,000

PLEASE VISIT THE HMRC WEBSITE FOR MORE INFORMATION

Stamp duty reserve tax (SDRT)

0.5% rounded up to the nearest penny when you buy shares that settled via electronic paperless system.

Standard stamp duty

When you buy shares worth over £1,000 that settle via a paper system the tax charge is 0.5% rounded up to the nearest penny. There is no charge if the shares are worth less than £1,000.

Stamp duty land tax (SDLT) – residential

Charged when you buy residential land or property.

Purchase price or valueTax rate paid on portion of purchase priceTax rate paid on second and subsequent houses
Up to £250,0000%3%
£250,001 to £925,0005%8%
£925,001 to £1,500,00010%13%
Over £1,500,00012% 15%
   

 

Please note bands may be different if you’re buying your first home. Stamp Duty Land Tax (SDLT) isn’t charged in Scotland or Wales. In Scotland, a Land and Buildings Transaction Tax (LBTT) will be applied instead, and in Wales a Land Transaction Tax (LTT) will apply.

TaxTax rate
Income tax rate (above £1,000 per annum)45%
Capital gains tax allowance£3,000 (divided by the number of trusts settled subject to a minimum of £600 per trust)
Capital gains tax rate20% / 28% for residential property
Inheritance tax (transfers into discretionary trusts)20%
Dividend tax rate (up to £1,000 per annum)8.75%
Dividend tax rate (above £1,000 per annum)39.35%
 

State Pension age

Historically the State Pension age was 60 for women and 65 for men. This has changed.

It’s now 66 for everyone.

The State Pension age is due to increase to 67 between 2026 and 2028 and to 68 between 2044 and 2046.

VISIT THE GOVERNMENT’S WEBSITE FOR MORE INFORMATION

Basic State Pension rate

For those who reached State Pension age before 6 April 2016, the maximum in 2023/24 is £156.20 per week.

In addition, there may be entitlement to earnings related State Second Pension (S2P) formerly State Earnings Related Pension Scheme (SERPS).

You needed 30 qualifying years for a full basic State Pension. A qualifying year is one where either sufficient national insurance was paid or was deemed to have been paid.

VISIT THE GOVERNMENT’S WEBSITE FOR MORE INFORMATION

New State Pension rate

For those who reached State Pension age on or after 6 April 2016, the maximum in 2023/24 is £203.85 per week.

This figure will be reduced for those who have contracted out of the State Second Pension (S2P), formerly State Earnings Related Pension Scheme (SERPS), before 6 April 2016.

35 qualifying years are needed to receive the full New State Pension. A qualifying year is one where either sufficient national insurance has been paid (on earnings above a lower limit of £6,396 for this tax year) or deemed to have been paid.

Transitional rules apply for those who accrued State Pension before 6 April 2016.

VISIT THE GOVERNMENT’S WEBSITE FOR MORE INFORMATION

GET A STATE PENSION STATEMENT

Tax relief on pension contributions

Tax statusTax relief 2023/24*Net cost of £1,000 gross contribution 2023/24
Non-taxpayer (including children) and Scottish Starter rate20%£800
Scottish intermediate rate21%*£790
Scottish higher rate42%*£580
Scottish additional rate47%*£530
Basic rate taxpayer20%£800
Higher rate taxpayer40%*£600
Additional rate taxpayer45%*£550

* Any tax relief above basic rate is restricted to the amount of tax paid at that rate. This assumes no other taxable income.

FIND OUT MORE ABOUT THE TAX BENEFITS OF PENSIONS

Pension contribution limits

Relevant UK earnings (usually earnings from employment or self-employment)Maximum personal or employee contribution for tax relief
£0 – £3,600£3,600
£3,601 and over100% of earnings

Annual allowance: £60,000. A £10,000 money purchase annual allowance will apply for those who have flexibly accessed their pensions.

Tapered annual allowance: If your threshold income is over £200,000 then your annual allowance will be reduced by £1 for every £2 that your adjusted income is over £260,000; to a minimum annual allowance of £10,000.

Threshold income are all taxable income plus salary sacrificed for pension contributions on or after 9 July 2015 minus personal or employee (not via salary sacrifice) pension contributions.

Adjusted income are all taxable income plus employer pension contributions (including via salary sacrifice) plus some benefit accrual in defined benefit, e.g. final salary, pension schemes.

Class 1 employed (2023/24)

Earnings per weekEmployee rate
£0 to £242Nil
£242 to £96712%
£967 and over2%
Earnings per weekEmployer rate
£0 to £175Nil
£175 and over13.8%

National Insurance applies to most earned income or benefits in kind. National Insurance rates may be different for certain employees, e.g. if employee is over the State Pension age. No National Insurance paid by employers up to £967 for employees under 21 or apprentices under 25.

Self-employed and voluntary

Type of National Insurance contributionTax rate 2023/24
Class 2 self-employed£3,45 per week
Class 2 small profits threshold£6,725 per annum
Class 3 voluntary£17,45 per week
Class 4 lower profits limit£12,570 per annum
Class 4 upper profits limit£50,270 per year
Class 4 rate between lower profits limit and upper profits limit9%
Class 4 rate above upper profits limit2%