As it does every year, the start of the 2022-23 tax year on 6th April brings with it some changes to tax rates and allowances.
It’s really important to understand how this might affect you, so we’ve put together a brief guide to help explain how it all works.
Personal allowance – what is it?
The personal tax allowance is the amount of money you can earn before income tax becomes payable, and applies to anything you earn, whether it’s from an employer, from self-employed earning, or even a mix of both.
For 2022-23 the allowance is the same as the previous year – £12,570. As you only pay tax on earnings above that amount, if your salary is (for instance) £20000, your taxable income would be worked out as follows:
Salary: £20000
Minus £12570 (personal allowance)
= £7430 taxable income
If you’re a high earner, you should be aware that for every £2 you earn above £10000, your Personal Allowance is reduced by £1. So if you earn £125000, you have a Personal Allowance of zero.
Income tax – how’s it worked out?
Your income tax is worked out depending on what you earn and how you’ve earned it. It’s broken into tax bands, which are segments representing a salary range, and the amount of income tax you pay depends on the percentage payable within each salary band. Some people may think that if your wages increase and you move into a new tax band, your new tax rate applies to all your earnings: this is a common misconception!
Income tax rates for 2022-23 in England, Wales and Northern Ireland are as follows
| Tax rate | 2022-23 Threshold |
| Personal allowance | £0 – £12,570 |
| Basic rate income tax (20%) | £12,571 – £50,270 |
| Higher rate income tax (40%) | £50,271 – £150,000 |
| Additional rate income tax (45%) | £150,000 upwards |
So this means that if your salary is £75,000, for 2022-23 you’ll pay the following income tax over three tax bands:
| Amount | Tax rate | Amount taxable at this rate |
| £12,570 | 0% | £12,570 |
| £12,571 – £50,270 | 20% | £37,700 |
| £50,271 – £75,000 | 40% | £24,730 |
Scotland has a different set of tax rates, as detailed below:
| Tax rate | 2022-23 Threshold |
| Personal allowance | £0 – £12,570 |
| Starter rate income tax (19%) | £12,571 – £14.667 |
| Basic rate income tax (20%) | £14,668 – £25,296 |
| Intermediate rate income tax (21%) | £25,297 – £43,662 |
| Higher rate income tax (41%) | £43,663 – £150,000 |
| Top rate income tax (46%) | Over £150,000 |
So using the same £75,000 salary example, the taxable incomes would be as follows:
| Amount | Tax rate | Amount taxable at this rate |
| £12,570 | 0% | £12,570 |
| £12,571 – £14,667 | 19% | £2097 |
| £14,668 – £25,296 | 20% | £10,629 |
| £25,297 – £43, 662 | 21% | £18,366 |
| £43,663 – £75,000 | 41% | £31,338 |
National Living Wage and National Minimum Wage
If you’re paid on an hourly rate, then depending on your age, your basic minimum wages are going to be changing for 2022-23, to the below rates.
| Employee Age | 2022-3 National Minimum Wage (per hour) |
| Apprentices | £4.81 |
| 16 – 17 | £4.81 |
| 18 – 20 | £6.83 |
| 21 – 22 | £9.18 |
If you’re 23 and over you are paid the National Living Wage, which goes up from £8.91 in 2021-22 to £9.50 per hour for 2022-23.
A quick note on National Insurance
As we mentioned in a previous blog, there are going to be some changes to National Insurance for 2022-23, due to the Health and Social Care Levy. If you make Class 1 or Class 4 NI contributions, expect to see a 1.25% increase in your contributions.