When does the new tax year start in 2023?
TODAY is the last day of the current tax year, with the new one beginning tomorrow, April 6.
In the UK, the tax year runs from April 6 to April 5 – not from January to December like a calendar year.
In each tax year, you get certain allowances, like how much you can earn, save and put into your pension before you start paying tax on it.
How much tax you have to pay can also change from one year to the next too.
Here we explain everything you need to know going into the new tax year.
When does the 2022/2023 tax year start and end?
The current 2022-2023 tax year comes to an end today, April 5, and the new tax year for 2023-2024 will begin tomorrow, April 6.
Many other countries around the world have tax years that run with the calendar year.
In Ireland, the US, France and Germany for example, it starts on January 1 and ends on December 31.
But in the UK, our tax year starts and finishes mid-way through the calendar year.
Why does the UK tax year start on April 6 every year?
The reason the UK has its tax year start in April is due to major calendar reforms that occurred in 1752.
The year 1752 was shortened by 11 days when the UK moved over to the Gregorian calendar from the Julian calendar.
In order to keep the tax year of 1752 at 365 days, its ending was moved to 5 April 1753.
How much can I earn tax-free in 2022/2023?
The tax-free personal allowance – the amount you can earn before paying tax – is £12,570.
It can change from one year to the next, but the government has frozen the level for now.
If you earn over £12,570, you will start paying 20% tax on your income.
For higher-rate taxpayers, you will not have to start paying 40% tax until you’re earning £50,271.
Those thresholds had previously been frozen until 2026, but this was later extended until 2028.
After the Budget in March, the Treasury also confirmed the freeze on income tax and National Insurance thresholds will still go ahead.
This will ultimately lead to a pay cut when you take into account inflation.
What to do if you’re newly self-employed
When the new tax year starts on April 6, HMRC will notify you about filling out a tax return for the year just past – so 2022/2023.
If you have become newly self-employed in the last year, you will need to register with HMRC for tax and National Insurance in order to get your notification.
To do this you can register online at GOV.UK, complete an online form CWF1, phone HMRC helpline for the newly self-employed, or complete an on-screen form before printing it off and posting it to HMRC.
When does my pension start getting taxed?
Annual pension allowance
The annual allowance is the maximum amount that you can save into your pension in a year before you get penalised with tax.
It covers all your pension pots including personal, workplace and final salary schemes.
The allowance is currently set at £40,000 per year, but will increase to £60,000 from April 6, 2023.
Lifetime pension allowance
The lifetime allowance is the maximum amount that you can save into your pension without having to pay extra tax on top of any annual tax.
The current allowance is £1,073,100, but this will be abolished altogether from April 6, 2023.
This means you will not be taxed on your pension on amounts above the annual threshold from tomorrow.
The changes were announced by Chancellor Jeremy Hunt in March.
What is an Isa allowance?
An Isa (individual savings account) is a type of savings account where you don’t pay any tax on interest.
Each year you get an allowance which is the total amount you can save into it each year to take advantage of this tax benefit.
You can save up to £20,000 each year into an Isa and if you don’t use it up you can’t carry it over to the next year.
First-time buyers saving into a Lifetime Isa (Lisa) can save up to £4,000 into this account each year tax-free.
If you put your cash in a standard bank account that’s not an Isa, you’ll be taxed on any interest over £1,000 if you’re a basic-rate taxpayer.
For higher rate taxpayers it’s £500 while additional rate taxpayers don’t get this allowance, which is known as the personal savings allowance (PSA).
The ISA tax-free allowance is more generous than the PSA which is useful if you have more in savings.
Junior ISAs, known as JISAs for short, are savings accounts for kids that work in the same way.
But the amount you can save into one tax-free each year is less at £9,000.
It used to be much less at £4,368 but the amount was increased in the Budget in 2020.
What is the capital gains tax allowance?
Capital gains tax is charged on the profit you make when you sell something that has gone up in value, such as stock and shares, artwork or even a second home.
The first £12,300 of profit is tax-free but after that, you’ll be charged up to 28% depending on what rate taxpayer you are and what you sold.
If you’re planning on selling something and the profits could be over this amount, cashing in at the right time can keep profits below the threshold or reduce your capital gains tax bill.
For example, cash in stocks and shares in two transactions over multiple tax years rather than a single transaction.
Will I get an automatic tax refund if I have paid too much tax?
If you’ve paid too much tax you should be eligible to get a refund.
The way you will be refunded depends on when you made the overpayment, and if it was in a current or previous job.
For example, if you’ve overpaid in your current job after April 6 2022, you will get the pay back in your salary.
To do this, you will have to check if you’re on the wrong tax code and, if so, ask HMRC to correct it.
But if you overpaid in the previous tax year, you should have been sent a P800 letter from HMRC to let you know how to get a refund.
To find out if you’re owed tax back and how to claim it, visit the gov.uk website.