Tax Allowances

The following key reliefs, exemptions and allowances will now be frozen until 2027-28:

• The income tax personal allowance of £12,570;
• The basic rate income tax band of £37,700 of taxable income;
• The employee’s primary National Insurance contribution (NIC) threshold of £12,570;
• The employer’s secondary NIC threshold of £9,100; and
• The inheritance tax nil rate band of £325,000 and residence nil rate band of £175,000.

The impact of these extensions will be to cause millions more people to fall into tax and, in particular, higher rate tax for the first time, because of natural inflationary increases in income. The appreciation in asset values will also mean that many more will fall into the inheritance tax net and so more people will need guidance on inheritance tax planning (see below).

The increase in the cost of living will have a significant impact on many of us. In the current world of stealth taxation, it is of even more importance that taxpayers use all their available allowances, reliefs, and exemptions to offset these tax increases.