Basic rate of income tax to reduce to 19% from 6 April 2024

The measure

The Chancellor announced a reduction in the basic rate of income tax from 20% to 19% with effect from 6 April 2024.

Who will be affected?

The measure will affect individuals and trustees who are subject to income tax.

The measure will apply to non-savings, non-dividend income such as employment, rental and pensions income in England, Wales and Northern Ireland. The rate reduction does not affect the taxation of non-savings non-dividend income of individuals living in Scotland, as the Scottish Government sets its own rates of income tax for these types of income. The reduced rate will apply to taxable savings income, irrespective of where the individual lives.

Under the agreed Fiscal Framework the Scottish Government will receive additional funding, worth around £350 million in 2024-25, and it will be for the Scottish Government to determine whether to use this to reduce income tax or other taxes, or increase spending.

Due to the way that tax relief is provided for donations to charities under the Gift Aid scheme, a reduction in the basic rate of tax would mean that charities would receive less income for each pound donated by individuals under the scheme. For a three-year transitional period, the current 20% relief will be maintained for Gift Aid purposes.

When will the measure come into effect?

The basic rate of income tax will reduce with effect from 6 April 2024.

The three-year transitional period for Gift Aid will end on 5 April 2027.