At the time of this article was published, the new tax year had already started. Some of the personal tax changes had been public knowledge for months, and some of the rises had been anxiously awaited as the country continued to face a cost-of-living squeeze.
With these personal tax changes adding to the financial burden for many families, it was more important than ever to understand what had changed to prepare effectively.
Below is a summary of the most significant personal tax changes from 2022/23 that affected UK taxpayers.
Income Tax and Personal Allowance
In the Spring Budget 2021, Chancellor Rishi Sunak had announced that income tax thresholds, including the personal allowance, would be frozen until 2026.
This meant income tax and the personal allowance remained as they were in the 2021/22 tax year:
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Personal allowance (tax-free): up to £12,570 of income.
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Basic rate tax (20%): further income up to £50,270.
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Higher rate tax (40%): further income up to £150,000.
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Additional rate tax (45%): income above £150,000.
The amount of income tax paid depended on income above the personal allowance and how much fell into each tax band. Those earning over £100,000 saw a reduction in their personal allowance.
The Government typically increased the bands and allowances with inflation to reflect wage growth. However, the freeze meant any additional income earned might have been taxed more heavily than if thresholds had risen with inflation.
The freeze was expected to raise an additional £6bn in revenue.
Scottish income tax thresholds, on the other hand, were set to rise from April 2022, although the personal allowance remained frozen.
Scottish Bands comparison:
| 2021/22 | 2022/23 | |
| Starter (19%) | Over £12,570-£14,667 | Over £12,570-£14,732 |
| Basic (20%) | Over £14,667-£25,296 | Over £14,732-£25,688 |
| Intermediate (21%) | Over £25,296-£43,662 | Over £25,688-£43,662 |
| Higher (41%) | Over £43,662-£150,000 | Over £43,662-£150,000 |
| Top (46%) | Above £150,000 | Above £150,000 |
National Insurance Contributions
Changes to National Insurance contributions (NICs) had been widely reported since the Government announced in September 2021 that they would rise by 1.25% in 2022/23.
Earnings above the lower earnings limit and up to the upper earnings threshold of £50,270 (also frozen until April 2026) were taxed at 13.25%, up from 12%.
This NICs increase applied only for 2022/23 and was later replaced by a 1.25% health and social care levy from April 2023, shown on payslips.
The Government aimed to use this levy to boost NHS and social care spending by £11.4bn.
Another major change came into effect on 6 July 2022, when the NICs threshold rose to £12,570, aligning it with the personal allowance.
Dividend Tax
Dividend tax also increased in 2022/23 by 1.25 percentage points. Unlike NICs, this increase was not reversed the following year.
The updated rates were:
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Basic rate: 8.75% (up from 7.5%)
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Higher rate: 33.75% (up from 32.5%)
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Additional rate: 39.35% (up from 38.1%)
Among the personal tax changes, the tax-free dividend allowance remained at £2,000, meaning only the dividends received over this amount were taxed.
Those paying themselves via dividends, such as directors, may have considered alternatives such as pension contributions to reduce tax exposure.
Inheritance Tax
The inheritance tax nil rate band (£325,000) and residential nil rate band (£175,000) remained frozen until 2026, as did the pensions lifetime allowance of £1,073,100.
With rising house prices, more Estates were expected to fall within the inheritance tax threshold.
A new rule from 1 January 2022 affected how Estates were classified:
Estates of individuals who died after this date could be classed as ‘excepted’ and not require formal reporting — provided:
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The Estate was below the IHT threshold.
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It was £650,000 or less with unused nil rate band transferred from a spouse.
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It was less than £3 million and passed to a UK-domiciled spouse or charity.
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UK assets were under £150,000 and the deceased was domiciled abroad.
Capital Gains Tax
The capital gains tax (CGT) allowance was frozen at £12,300 per individual until 2026.
This freeze meant that more gains – particularly from second homes or shares not held in ISAs – would likely be taxed.
One immediate change from the Autumn Budget 2021 extended the CGT reporting deadline from 30 to 60 days on residential property disposals (not main residences).
For help or advice, please talk to our Tax Advisers on 0161 761 5231 or email: theteam@horsfield-smith.co.uk
