What’s changing in the 2023-24 tax year?

What you’ll learn:

• How some of the tax allowances and rates are changing.
• How much the personal allowance will increase by.
• Who the changes will affect.

A range of new tax allowances and rates usually comes into effect when one tax year finishes and a new one begins.

It’s worth understanding what the major changes are so you can make the most of the reliefs available to you. Here’s a guide to some of the biggest changes coming into effect in the 2023-24 tax year, which runs from 6 April 2023 to 5 April 2024.

Remember that this is just a guide to some of the changes for the 2023-24 tax year, and that tax rules and allowances can and do change over time. Their effect on you depends on your individual circumstances, which can also change.

Pension Lifetime Allowance

As of 6^th April 2024  there will no longer be a maximum amount of pension savings that you can build up over your lifetime. The limit, known as the Lifetime Allowance (LTA), is currently £1,073,100. Any excess was previously taxed at a maximum of 55% but as of April 2024 this will no longer be the case. Until then, whilst the LTA remains in place, the LTA tax charge will be removed, meaning no one will pay an LTA tax charge from 6 April 2023.

The changes mean that you can save into your pensions without the concern of a lifetime allowance tax charge should you breach the limit.

Personal Allowance

The tax-free personal allowance is the amount of income you can earn before you have to start paying income tax. All individuals are entitled to the same personal allowance, regardless of their date of birth.

The personal allowance is £12,570 in the 2023-24 tax year. Bear in mind that the personal allowance is restricted by £1 for every £2 of an individual’s adjusted net income above £100,000.

A spouse or civil partner who isn’t liable to income tax above the basic rate may transfer £1,250 in the 2023-24 tax year to their spouse or civil partner, as long as the recipient isn’t liable to income tax above the basic rate.

Capital gains tax (CGT)

The current CGT annual exemption has remained at £6,000 in 2023-24.

If you invest outside an ISA, any profits made above the annual CGT allowance are subject to tax at 10% or 20% depending on your tax band. Since April 2016, there is an additional 8% surcharge to be paid on residential property and carried interest (the share of profits or gains that is paid to asset managers).

CGT on residential property does not apply to your main home, only to additional properties (such as a flat you let out).

Various other allowances and rates have also changed in the 2023-24 tax year.