Income Tax Changes From April 2023 - What You Need To Know

Income tax thresholds and rates are subjects of great importance when discussing tax changes, and they play a significant role in the tax planning process. As of April 2023, the United Kingdom introduced significant changes to its income tax system. These changes affect millions of taxpayers and have far-reaching implications for individuals, families, and businesses across the country.


This comprehensive guide will delve into the key income tax changes for the April 2023 tax bill, their impact, and what you need to know to navigate this new tax landscape.


The Key Changes

Income Tax Rates and Bands

One of the most significant changes coming into effect from April 2023 is the revision of income tax bands and rates. These changes aim to simplify the tax system while ensuring that the government continues to receive adequate revenue. The new income tax bands and rates are as follows:


Basic Rate: The basic rate remains at 20% for incomes between £12,571 and £50,270.


Higher Rate: The higher rate will continue to be 40% for incomes between £50,271 and £150,000.


Additional Rate: The additional rate also remains unchanged at 45% for incomes exceeding £150,000.


Personal Allowance

The personal allowance, the amount of income you can earn before you start paying income tax, will see an increase. From April 2023, the personal allowance will rise to £12,571, up from the previous tax year's £12,570. This means that individuals can earn an additional £1 without incurring income tax.


Higher Rate Income Tax Thresholds

The higher rate threshold, the point at which you start paying the higher rate of income tax, will also be adjusted. In April 2023, this additional rate threshold will increase to £50,270 from the previous £50,270. This change ensures that more income remains subject to the basic rate of tax.


National Insurance Contributions (NICs)

National Insurance Contributions will also be affected by the income tax changes. The earnings threshold at which you start paying NICs will be aligned with the higher rate threshold. From April 2023, NICs will commence at the same income level as the higher rate threshold, which is £50,270. This change means that an individual's annual earnings below this threshold will not pay NICs.


Dividend Tax

For those who receive income from dividends, the dividend tax allowances and rates will be affected. The dividend allowance will remain at £2,000, meaning you can earn up to this amount in dividends without paying tax. Beyond this allowance, the following rates will apply:


  • Basic Rate Taxpayers: 7.5%
  • Higher Rate Taxpayers: 32.5%
  • Additional Rate Taxpayers: 38.1%


Capital Gains Tax

Capital Gains Tax (CGT) is levied on the profit from the sale of assets. From April 2023, the annual exempt amount for CGT will increase to £14,000 for individuals and £28,000 for couples. This means that you can make a profit of up to these amounts from the sale of assets without incurring CGT.


Marriage Allowance

Marriage Allowance allows married couples and civil partners to transfer a portion of their personal allowance to their spouse or partner if one of them doesn't use all of their personal allowance. From April 2023, this allowance will remain at £1,260.


The Impact

These income tax changes will have a wide-ranging impact on various segments of the population. Here's how different groups are likely to be affected:


Basic Rate Taxpayers

Basic rate taxpayers are individuals with incomes below £50,270. The changes in income tax bands and rates won't directly affect them. They will continue to pay income tax bills at the basic rate of 20%. However, the increase in the personal allowance means that they can earn more income without paying any tax, which can provide some relief.


Higher Rate Taxpayers

Higher-rate taxpayers, with incomes between £50,271 and £150,000, will also see no change in their tax rate. They will continue to pay income tax bills at the rate of 40%. However, the alignment of the higher rate threshold with the NICs threshold could result in some savings for this group.


Additional Rate Taxpayers

Individuals earning over £150,000 fall into the additional rate taxpayer category. They will still be subject to the 45% income tax rate. The increase in the personal allowance won't significantly impact this group, but they will benefit from the higher annual exempt amount for CGT.


Dividend and Investment Income Recipients

Those who receive income from dividends and investments will be affected by the changes in dividend tax rates and CGT. Basic tax band and rate taxpayers receiving dividends will see no change in their tax rate. However, payers in the higher top tax bracket and top tax band will experience a slight increase in their tax liability.


Low-Income Earners

The increase in the personal allowance is beneficial for low-income earners, as it allows them to keep more of their earnings. This change can help those struggling to make ends meet.


Couples and Families

Marriage Allowance remains unchanged, providing couples and civil partners with the option to transfer a portion of their personal allowance to reduce their overall tax liability.


Property Investors and Asset Sellers

The higher annual exempt amount for CGT can be advantageous for property investors and individuals selling assets. It allows them to make a higher profit before incurring capital gains tax.


What You Need to Know

As these income tax changes come into effect from April 2023, here are some important considerations:


Update Your Tax Code

Ensure that your tax code is updated to reflect the new income tax bands and rates. This will help your employer calculate the correct amount of tax to deduct from your earnings.


Use Tax-Efficient Investment Strategies

If you receive dividend income or plan to sell assets subject to CGT, consider using more tax-efficient investment strategies. Consult with a financial advisor to explore options like tax-efficient investments or tax-deferred accounts.


Review Your Financial Goals

Take the opportunity to review your financial goals and budget in light of these changes. The increase in the personal allowance can impact your disposable income and cost of living more, so adjust your financial plan accordingly.


Consider Pension Contributions

For higher earners, making pension contributions can be a much more tax-efficient way to reduce your taxable income. Contributions made within the annual allowance can lead to tax relief, potentially reducing your overall tax liability.


Seek Professional Advice

Tax laws are complex, and individual personal circumstances vary. Finding an accountant to ensure you're making informed financial decisions and optimising your tax position is advisable.


Stay Informed

Tax rules and regulations can change over time, so it's essential to stay informed about updates and potential future changes that may affect your financial situation.


Cost of Living and Tax Changes

It's important to note that these income tax changes are occurring in the context of a broader economic landscape. The cost of living, including essential expenses such as energy bills and council tax, has been a significant concern for many households. While the income tax changes may provide some relief, the overall cost of living remains a critical factor in people's financial well-being.


Energy Bills and Council Tax Rises

Energy bills and council tax are essential expenditures that impact every household. Rising energy costs and council tax bills can put additional financial pressure on individuals and families. It's essential to budget for these expenses and explore options for managing them effectively.


National Living Wage and Minimum Wage

The National Living Wage and the Minimum Wage are critical factors in addressing the living crisis. These rates determine the minimum income that workers should receive, and any changes in these rates can have a direct impact on individuals' earnings and their ability to cover their expenses.


Means-Tested Benefits

For those who may be struggling financially, means-tested benefits such as Universal Credit and pension credits can provide essential support. It's important to understand the eligibility criteria and how income tax thresholds and rates changes may affect your eligibility for these benefits.


State Pension and State Pension Age

Once you have reached state pension age, it is a vital source of income for retirees. Understanding the state pension age and the impact of income tax changes on your pension income is crucial for retirement planning.


Disability Benefits

Disability benefits provide financial support to individuals with disabilities. Changes in tax rules and thresholds can affect the amount of support available to those who rely on these benefits.


Inheritance Tax, Lifetime Allowance, and Pension Savings

Inheritance tax and lifetime allowance are important considerations for individuals planning their financial legacies. Changes in tax rules can impact the amount of tax owed on inheritances and the limits on pension savings.


Stay Up To Date With The Changing Tax Word: Get In Contact Today!

The income tax changes coming into effect in April 2023 represent a significant shift in the UK's tax landscape. Understanding these changes, their impact on your personal circumstances, and the broader economic context is essential for effective financial planning.


Whether you are a basic rate taxpayer, a higher rate taxpayer, or fall into a different category, staying informed, seeking professional advice, and making informed financial decisions are key to navigating these changes successfully. Additionally, considering the broader cost of living, means-tested benefits, and other financial factors is essential for maintaining financial stability in the face of tax changes and economic challenges.


As the tax year progresses and new information becomes available, it's important to stay updated and adapt your financial plans accordingly. Tax rules can evolve, and staying informed ensures that you make the most of your financial resources and manage your tax liability effectively.


Contact 10.CA today to find out more!

Company tax returns and accounts have gone digital

By Charlie Flockhart • April 21, 2026
HMRC and Companies House have confirmed that from 1 April, all businesses must use compliant, commercial software to file their company’s tax returns. As of 31 March, the free joint online service, commonly known as the CATO portal, from these two Government bodies has been removed and you must now use software to file company tax returns to HMRC. For the time being, you will still be able to file annual accounts at Companies House using third-party software, WebFiling services or paper filing. The decision has been made to end this service as it is “outdated and no longer aligns with modern digital standards”, according to Companies House. This change is in line with the introduction of the Economic Crime and Corporate Transparency Act, which implemented “enhanced corporation tax requirements and changes to UK company law.” It also follows on from a major IT security breach at Companies House, identified in March 2026, that exposed the WebFiling system and allowed some users to potentially access and amend the details of other companies. Although the breach has now been resolved and security strengthened, it has raised concerns about the reliability of GOV.UK One Login service.  Can you still amend previous returns using the free service? HMRC and Companies House have confirmed that now that the free filing service has closed, company directors will have to use commercial tax software if they need to make changes to a previously submitted Corporation Tax return or refile a rejected return. From now onwards, any previously filed financial information will no longer be available in the system, as it has not been retained and will need to be entered again. HMRC has said that, for amendments, it will also be acceptable to send a paper return to the Corporation Tax Services office. If you have previously filed financial accounts with Companies House and you want to make changes or corrections, this will also need to be done via commercial software or by sending paper accounts to Companies House via post. Are there any exceptions to this new rule? Companies can file a paper Corporation Tax return only in limited circumstances, such as if they wish to submit it in Welsh or can demonstrate a valid, reasonable excuse to HMRC. Otherwise, returns must be filed online using commercial software. If you are affected by this change and need help choosing and utilising commercial software to complete your Corporation Tax return, please speak to our team.

Capital allowances - New rules for a new tax year

By Charlie Flockhart • April 21, 2026
Capital allowances continue to provide an effective method for businesses to reduce their tax bills, by providing incentives for investment in eligible expenditure – typically plant and machinery. Historically, these reliefs have been subject to change and the 2026/27 tax year is no different, as the Government moves to alter two key reliefs – Writing Down Allowance (WDA) and a new First-Year Allowance (FYA).  Reduction of the Writing Down Allowance The WDA will be reduced from 18 per cent to 14 per cent on the main pool of qualifying plant and machinery assets. This change has been introduced on two different dates, starting with companies subject to Corporation Tax on 1 April and followed shortly thereafter by those subject to Income Tax, such as sole traders and partnerships, from 6 April. Businesses with large brought forward main pool expenditures are expected to lose the most from the reduction in the main rate of WDA. In the long-term, the change may also reduce incentives for investment in second-hand assets and cars, which benefited under the previous rules. The new First-Year Allowance To offset some of the impact of the reduction in WDA, a new 40 per cent FYA on main rate expenditure, primarily still covering plant and machinery, will now be available. This new FYA is intended to encourage investment in areas where other FYAs don’t allow, in particular, assets bought by unincorporated businesses and leases. Sole traders and partnerships will, for the first time, be able to get additional support at the point of investment, which means that more businesses will be able to reduce their tax bill in the same year as their investment. This is expected to give a quick cashflow boost to those affected and provide additional support for future investments. However, it is important to note that this FYA does not support investment in second-hand assets, cars or leased assets in other countries. Finally, the Government has also confirmed that small business owners will continue to benefit from tax relief on electric vehicles, as the 100 per cent FYA for zero-emission vehicles and charge points has been extended until 31 March 2027 for Corporation Tax and 5 April 2027 for Income Tax. This gives businesses greater certainty when planning ahead, while also providing a strong financial incentive to invest by reducing tax bills upfront. Want to make more of capital allowances? If you think you may be eligible for capital allowances, either due to the changes outlined in this article or more generally, then it is important that you claim the tax relief available to you. If you would like help reviewing the current capital allowances that your business can claim, please get in touch.

Government abolishes work-from-home relief

By Charlie Flockhart • April 21, 2026
Directors and employees claiming work-from-home tax relief will no longer be able to claim it from the start of the new tax year – 6 April 2026. Why is this relief being taken away? The Chancellor announced the removal of the work-from-home relief as part of her latest Autumn Budget. The main reasoning given for the abolition is that it will support the nation’s deficit reduction. HMRC has also said that it no longer believes it is fit for purpose or easy to police. Who could claim work-from-home relief? Work-from-home relief has been utilised by homeworkers since the early 2000s, helping them offset some of the costs of heating, lighting, broadband and other home-office expenses required to complete their jobs. The relief allowed employees and directors to claim a flat rate of £6 per week or a deduction for actual costs. However, those who do not claim the flat fee were required to provide evidence of the exact costs, such as an invoice or bill. Eligibility for the relief only applied to individuals who had no other choice but to work from home. For instance, where the business did not have an office or the daily commute was not feasible. Individuals who simply preferred to work from home did not qualify. Is there any relief still available for home workers? The only remaining tax-free support will be reimbursements made directly by employers. This applies only where the payments relate to demonstrated additional household costs and where the costs are incurred wholly, exclusively and necessarily for employment duties. For anyone still claiming work-from-home relief, it is worth reviewing your position now to understand how this abolishment will impact your take-home pay.