Rates and allowances

The measure

Income tax 

The government has reaffirmed the previous announcement from the Spring Budget that the basic, higher and additional rates of tax will remain frozen at 20%, 40% and 45% respectively until April 2026.  The personal allowance will also remain frozen for the same period.  

The rates applicable to dividend income will rise to 8.75%, 33.75% and 39.35% respectively from 6 April 2022, in line with the forthcoming introduction of the Health and Social Care Levy.  

Changes to the personal allowance apply to the whole of the UK, while the measures announced in respect of rates and thresholds apply only to England, Wales and Northern Ireland.  

National Insurance contributions (NICs) 

The NIC primary threshold for employees and lower profits limits for the self-employed have been increased in line with CPI inflation.  As the upper limits for NICs are linked to the income tax higher rate threshold, these are also frozen at £50,270 until April 2026.  

Capital gains tax 

The government also confirmed that the annual exempt amount for capital gains tax remains frozen. The 2021/22 amounts of £12,300 for individuals and £6,150 for trustees and personal representatives will be maintained until April 2026. 

Other bands and allowances 

A number of other bands and allowances are confirmed as remaining at existing levels until April 2026, including:  

• Inheritance tax nil-rate band (£325,000) and the residence nil-rate band (£175,000)
• Pensions lifetime allowance (£1,073,100)
• Adult ISA subscription limit (£20,000 per annum). 

The savings tax band to which the 0% starting rate applies will remain at its current £5,000 level in the 2022/23 tax year. 

Who will be affected?

All individual taxpayers.

When will the measure come into effect?

The rates and allowances will remain the same as of 6 April 2022, and should be maintained until 6 April 2026.