The UK personal allowance, tax rates and bands for the tax year 2022/23 were announced by the Chancellor
in the October 2021 Budget.
The personal allowance
The personal allowance is currently £12,570 and will be frozen at £12,570 for the tax years to 2025/26.
There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000. The
reduction is £1 for every £2 of income above £100,000. So there is no personal allowance where adjusted
net income exceeds £125,140.
The marriage allowance
The marriage allowance permits certain couples, where neither party pays tax in the tax year at a rate
other than the basic rate, to transfer £1,260 of their personal allowance to their spouse or civil
The basic rate of tax is 20%. In 2022/23 the band of income taxable at this rate is £37,700 so that the
threshold at which the 40% band applies is £50,270 for those who are entitled to the full personal
allowance. The bands of tax are also frozen for the tax years to 2025/26.
Individuals pay tax at 45% on their income over £150,000.
The tax on income (other than savings and dividend income) is different for taxpayers who are resident in
Scotland to taxpayers resident elsewhere in the UK. The Scottish income tax rates and bands apply to
income such as employment income, self-employed trade profits and property income.
In 2022/23 there are five income tax rates which range between the starter rate of 19% and the top rate
of 46%. The basic rate of tax is 20% and there is an additional intermediate rate of 21%. Scottish
taxpayers are entitled to the same personal allowance as individuals in the rest of the UK. The two
higher rates are 41% and 46% rather than the 40% and 45% rates that apply to such income for other UK
residents. For 2022/23 the threshold at which the 41% band applies is £43,663 for those who are entitled
to the full personal allowance.
Savings and dividend income are taxed using UK rates and bands.
From April 2019, the Welsh Government has the right to vary the rates of income tax payable by Welsh
taxpayers. The UK government has reduced each of the three rates of income tax paid by Welsh taxpayers by
10 pence. The Welsh Government has set the Welsh rate of income tax at 10 pence which will be added to
the reduced rates. This means the tax payable by Welsh taxpayers continues to be the same as that
payable by English and Northern Irish taxpayers.
Tax on savings income
Savings income is income such as bank and building society interest.
The Savings Allowance applies to savings income and the available allowance in a tax year depends on the
individual’s marginal rate of income tax. Broadly, individuals taxed at up to the basic rate of tax have
an allowance of £1,000. For higher rate taxpayers the allowance is £500. No allowance is due to
additional rate taxpayers.
Some individuals qualify for a 0% starting rate of tax on savings income up to £5,000. However, the rate
is not available if taxable non-savings income exceeds £5,000.
Tax on dividends
The first £2,000 of dividends are chargeable to tax at 0% (the Dividend Allowance). For 2022/23 and
subsequent tax years the rate at which dividends received above the Dividend Allowance are taxed has
increased across all rates by 1.25% to the following rates:
- 8.75% for basic rate taxpayers
- 33.75% for higher rate taxpayers
- 39.35% for additional rate taxpayers.
Dividends within the allowance still count towards an individual’s basic or higher rate band and so may
affect the rate of tax paid on dividends above the Dividend Allowance.
To determine which tax band dividends fall into, dividends are treated as the last type of income to be
The marriage allowance reduces the recipient’s tax bill by up to approximately £250 a year. To
benefit from the marriage allowance one spouse or civil partner must normally have no income or
income below the personal allowance for the year. The marriage allowance was first introduced for
2015/16 and there are couples who are entitled to claim but have not yet done so. It is
possible to claim for the four years back to 2018/19 where the entitlement conditions are
met. The total tax saving for all years up until 2022/23 could be over £1,000. A claim for
2018/19 will need to be made by 5 April 2023.