On Friday 23rd September Chancellor Kwasi Kwarteng announced his Growth Plan, which will tackle energy costs to help reduce inflation, support businesses and help households. Here are the changes being made;
Income Tax
The government has announced that the Basic Rate of Income Tax will be cut from 20% to 19% from April 2023, a year earlier than initially planned. At the moment basic rate taxpayers in England, Wales and Northern Ireland pay 20% on any annual earnings between £12,571 to £50,270. With this cut, basic rate taxpayers will be £130 better off in 2023-24.
The government hopes this can help 31 million taxpayers as they will be directly affected by this. It has been average that taxpayers will gain £170 in 2023-24, just from Income Tax being cut from 20% to 19%
Charities will also have a four-year transition period for Gift Aid relief to help them maintain the Income Tax basic rate relief at 20%. This will help support around 70,000 charities across the UK until April 2027.
The Additional Rate of Income Tax will be abolished from 6th April 2023, this currently affects taxpayers who earn over £150,000 and must pay 45% in income tax. This means that there will be one higher rate of income of 40% that affects taxpayers earning over £50,270. On average, higher rate taxpayers will be £360 better off, in 2023-24.
The 1.25% increase in dividend tax that was recently introduced in April 2022, will be reversed from April 2023.