Mini-budget 2022: Income Tax reduced

In his mini-budget on 23 September 2022, Chancellor Kwasi Kwarteng, announced two reductions in the rate of Income Tax. [This was reversed on 17 October 2022 by the new Chancellor Jeremy Hunt.]

From 6 April 2023

• The Basic Rate of Income Tax will be cut from 20% to 19%. This accelerates the rate reduction which had been planned to apply from April 2024.
  • There will be a four-year transition period for Gift Aid relief to maintain the Income Tax basic rate relief at 20% until April 2027.
  • There will also be a one-year transitional period for Relief at Source (RAS) pension schemes, allowing them to continue to claim tax relief at 20%. [This was reversed on 17 October 2022]. See Fiscal Statement October 2022: At a glance
• The additional rate (45%) of Income Tax on income over £150,000 will be abolished and replaced by a single higher rate of Income Tax of 40% * [This proposal was reversed by the Chancellor on 3 October 2022]
  • The dividend additional rate will also be removed to align with the dividend upper rate. This dividend upper rate is also reduced to 32.5% from 33.75% from 6 April 2023.
  • Taxpayers who would otherwise have been additional rate taxpayers will, from April 2023, benefit from a Personal Savings Allowance of £500, as is currently the case for higher rate taxpayers.

Scotland

• The reduction in the basic rate of Income Tax from 20% to 19% will not apply to non-savings non-dividend income in Scotland as this rate is set by the Scottish government.
• Similarly, the abolition of the additional rate of Income Tax in Scotland applies only to savings and dividend income as these tax rates have not been devolved.

Useful guides on this topic

Mini-budget 2022: at a glance
A summary for SMEs and their owners

External links

The Growth Plan 2022: Factsheet on Income Tax