Apr 6, 2022

Cost of living: National Insurance rise starts to hit pay packets

Earnings levels at which people start to pay income tax have been frozen, increasing the chances of employees being dragged into a new band - with a higher rate of tax - if they receive a pay rise. Some business owners pay themselves in dividends and so will face a tax rise. If a pay rise takes somebody from below £12,570 a year to above, then they will start paying income tax at 20% on the amount above £12,570. "A tax code of 1257L is currently used for most people who have one job or pension. If yours is different, make sure you understand why, so you're not paying too much tax," he said. At last month's Spring Statement, Mr Sunak pledged to reduce the basic rate of income tax by 1p in the pound before the end of the Parliament in 2024.For this new tax year, the personal allowance of capital gains tax has also been frozen at £12,300, so this much profit can be realised from assets in a year before tax is paid.

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