All information is correct as at 31 December 2022 unless otherwise stated.
As the adage goes “nothing is certain in life except death and taxes”.
Given the raft of tax reversals and changes we witnessed last year, you’d be forgiven for questioning the second part of one of Benjamin Franklin’s most famous quotes.
But, while allowances and rates might change, taxes aren’t going anywhere. Whether we like it or not, that means we all need to know what they are, the allowances we can get and how to make the most of them.
The table below highlights some of the main taxes you’re likely to come across.
This article isn’t personal advice. Tax rules can change, and any benefits depend on your circumstances. Tax law can be complex and we can’t show every rule or exemption here. If you’re not sure what’s right for you, ask for tax advice. If you live in Scotland, different tax rates and bands will apply.
How to pay less tax in 2023
Taxes are needed to pay for things like infrastructure, schools, and health services. We all need to pay our fair share. But the government has also put generous tax-saving incentives in place, encouraging us to save for our futures.
One of the most effective and easiest ways to pay less tax is by using your annual ISA allowance.
Every adult UK resident gets an ISA allowance each tax year of £20,000. This lets you save and invest without having to pay UK income and capital gains tax on the returns, helping your money go further.
ISA allowances look safe for now. But as we saw with tectonic tax shifts last year, nothing’s certain.
To avoid getting caught out by the shrinking dividend and capital gains tax allowances, consider using your ISA allowance. If you hold investments outside of an ISA, you’ll probably end up paying more tax.
The new tax year starts on 6 April 2023. So, if you haven’t used this year’s allowance, make sure you don’t miss out.
Use your allowance before it’s too late
Your 2023 tax table
| 2022/2023 | 2023/2024 | |
|---|---|---|
| Income tax | ||
| Starting rate for savings (non-taxpayer)* | 0% up to £5,000 | 0% up to £5,000 |
| Personal savings allowance (basic-rate taxpayers) | £1,000 | £1,000 |
| Personal savings allowance (higher-rate taxpayers) | £500 | £500 |
| Personal allowance** | £12,570 | £12,570 |
| Basic rate | £12,571 to £50,270 (20%) | £12,571 to £50,270 (20%) |
| Higher rate | £50,271 to £150,000 (40%) | £50,271 to £125,140 (40%) |
| Additional rate | Over £150,000 (45%) | Over £125,140 (45%) |
| Dividend tax | ||
| Dividend allowance | £2,000 | £1,000 |
| Basic rate | 8.75% | 8.75% |
| Higher rate | 33.75% | 33.75% |
| Additional rate | 39.35% | 39.35% |
| Capital gains tax (CGT) | ||
| CGT allowance | £12,300 | £6,000 |
| Basic rate | 10% (18% for residential property) | 10% (18% for residential property) |
| Higher rate and above | 20% (28% for residential property) | 20% (28% for residential property) |
*If your non-savings taxable income exceeds the starting rate limit, the starting savings rate won't apply to savings income.
**Your personal allowance is reduced if your income is over £100,000 - by £1 for every £2 above the limit.
Your annual ISA allowances
- Stocks and Shares ISA allowance: £20,000*
- Lifetime ISA (LISA): £4,000
- Junior ISA (JISA): £9,000
*If you hold more than one type of ISA, such as a Cash ISA and a Stocks and Shares ISA, you can spread your ISA allowance between them. Or you could put the full £20,000 in one.
Your annual SIPP allowances
- SIPP: £40,000*
- Junior SIPP: £2,880 (plus 20% tax relief from the government up to £720) = £3,600
* You can contribute 100% of your annual income to your SIPP each tax year, up to the maximum of £40,000 (unless you're a higher earner with a tapered allowance).