19/02/2023, 17:19 Everything you need to know about the tax year-end| Vanguard UK Investor

OPEN AN ACCOUNT LOG IN PERSONAL

<HTTPS://SECURE.VANGUARDINVESTOR.CO.UK/EN- <HTTPS://SECURE.VANGUARDINVESTOR.CO.UK/LOGIN? INVESTORS

Search the site
GB/PROCESS/REGISTRATION/APPLY/SELECT> INTCMPGN=HEADER_LOGIN_LINK>

Everything you need to know

about the tax year-end
17 <https://twitter.com/intent/tweet?
January text=Everything%20you%20need%20to%20know%20about%20t
2023 / end&via=vanguard_uk&url=https://www.vanguardinvestor.co.uk/a
Investing thoughts/investing-success/everything-you-need-to-know-about-th
success <https://www.linkedin.com/sharing/share-offsite/?
/ url=https://www.vanguardinvestor.co.uk/articles/latest-thoughts/in
Vanguard success/everything-you-need-to-know-about-the-tax-year-end>

The essentials: what it could mean for you and

your finances and why this year’s tax-year finale is
even more important than usual for investors.

By Steph Bremers, tax analyst, Vanguard, Europe

https://www.vanguardinvestor.co.uk/articles/latest-thoughts/investing-success/everything-you-need-to-know-about-the-tax-year-end 1/6
19/02/2023, 17:19 Everything you need to know about the tax year-end| Vanguard UK Investor

The official end of the 2022-23 tax year on 5 April and the start of the new
tax year the following day is now less than three months away.

Traditionally, the final quarter of the tax year is a time when investors try to
ensure they take maximum advantage of the different tax-efficient options
at their disposal – including individual savings accounts (ISAs) and self-
invested personal pensions (SIPPs).

And this year the stakes are a little higher due to changes announced by
the government, which could have an impact on your financial planning.

What’s so special about the next tax-year

changeover?
Principally, the fact that the government is seeking to raise tax revenues to
plug a deficit in the public finances. Some of the announced changes will
be implemented in 2023-24; others will creep up on us over time. So, it’s
important to understand what is and isn’t changing.

It’s not all negative news, though.

Which taxes are being raised?

It is not so much that taxes are being raised – but rather that more is being
taxed.

For investors, the main change is the amount you will in future be able to
earn in dividends or capital gains without paying tax outside of an individual
savings account (ISA) or pension. From 6 April 2023, the annual exemption
on capital gains tax (CGT) is set to more than halve to £6,000 from £12,300
currently. The CGT-free profits that can be realised on share and bond
investments (and other asset sales, including businesses and second
homes) is then set to halve again to £3,000 from 6 April 2024.

It’s a similar story with dividends – which are the payments that many
companies make to shareholders. Here the tax-free allowance is being
halved to £1,000 from 2023-24 and again to £500 in 2024-25.

It’s also more reason for investors to consider making the most of their tax-
free allowances this tax year and continuing to make the most out of their
ISA and pensions allowances going forwards.  

https://www.vanguardinvestor.co.uk/articles/latest-thoughts/investing-success/everything-you-need-to-know-about-the-tax-year-end 2/6
19/02/2023, 17:19 Everything you need to know about the tax year-end| Vanguard UK Investor

What about income tax?

The most overt change when it comes to income tax is the lowering from 6
April of the additional-rate (45%) tax threshold – to £125,140 from
£150,000. This new lower level is also where the personal allowance is
eliminated, since it is tapered at a rate of £1 for every £2 of annual income
earned above £100,000. The government estimates that 792,000
individuals will be impacted by this change from 6 April1.

Less overt but likely to impact tens of millions of taxpayers, including

retirees, is the extended freeze to April 2028 of the personal allowance and
the level at which people start to pay higher-rate (40%) tax rather than
basic-rate tax (20%). For the next five years, the personal allowance – the
maximum income each of us can receive and not pay tax – will stay at
£12,570. The higher-rate tax threshold, meanwhile, will stay at £50,270 per
year.

What that all effectively means is that more people will increasingly be
drawn into paying tax or being sucked into a higher tax bracket as their
earnings rise over the next half decade.

What about ISA and pension tax allowances?

The annual allowances for ISAs and Junior ISAs are to remain at £20,000
and £9,000, respectively. So, you can continue to invest up to these
amounts each tax year for the foreseeable future and not pay tax on the
potential profits you make or on the interest and income you receive with
the money that is invested.

The tax-free allowance for pension contributions is set to remain the same
too – at £40,000 per year or 100% of a person’s gross annual earnings, if
lower2. This cap applies across all your pension contributions – including
any made into a workplace pension as well as a self-invested personal
pension (SIPP). For basic-rate taxpayers, this means you can invest a
maximum £32,000 of your after-tax earnings into a pension and get an
automatic pension top-up of £8,000 from the government3. Higher-rate
(and additional-rate) taxpayers can potentially, in addition, claim back as
much as £8,000 (or £10,000) in paid taxes through their annual tax returns.

Also unchanged is the ability to carry forward unused pension allowances

from the previous three tax years. The lifetime pension allowance remains

https://www.vanguardinvestor.co.uk/articles/latest-thoughts/investing-success/everything-you-need-to-know-about-the-tax-year-end 3/6
19/02/2023, 17:19 Everything you need to know about the tax year-end| Vanguard UK Investor

at £1,073,100 too and is currently expected to stay there until 2025-26. 

What about state pensions?

The full new state pension is set to rise by 10.1% from 6 April to £203.85 a
week (£10,600 a year)4, accounting for 84% of a person’s annual tax-free
quota – a proportion that can only grow in the next five years due to the
freeze in the personal allowance.

Also increasing in line with inflation is the means-tested pension credit

designed for pensioners on the lowest incomes.

So it’s not all negative news.

Nevertheless, for investors able to plan for a more comfortable retirement

or invest more generally for a broad range of goals, the next few tax years
present new challenges that remind us all to maximise our allowances,
while we still can.

1 Income tax additional rate threshold from 6 April 2023

<https://www.gov.uk/government/publications/lowering-of-the-additional-rate-
threshold/income-tax-additional-rate-threshold-from-6-april-2023#summary-of-
impacts> , HM Revenue & Customs.

2Please note that this allowance may be subject to tapering depending on the amount
of income earned during the tax year. If your adjusted income is over £240,000, your
annual allowance could be reduced to as little as £4,000. Tax advice is recommended
in this case to assess your entitlement to this allowance. For more, see Work out your
reduced (tapered) annual allowance <https://www.gov.uk/guidance/pension-schemes-
work-out-your-tapered-annual-allowance> , HM Revenue & Customs.

3Note: Some workplace pensions deduct employee contributions before tax – on a

gross tax basis. 

4For any man born on or after 6 April 1951 and any woman born on or after 6 April
1953.

5 The state pension on its own, even after the expected increase, would still provide
less income each year than possible through the minimum wage. As such, if you hope
to enjoy a more comfortable retirement
<https://www.standardlife.co.uk/articles/article-page/how-much-do-i-need-to-retire> ,
it should only be seen as part of an overall retirement income plan.

https://www.vanguardinvestor.co.uk/articles/latest-thoughts/investing-success/everything-you-need-to-know-about-the-tax-year-end 4/6
19/02/2023, 17:19 Everything you need to know about the tax year-end| Vanguard UK Investor

Investment risk information

The value of investments, and the income from them, may fall or rise and
investors may get back less than they invested.

Any tax reliefs referred to in this document are those available under
current legislation, which may change, and their availability and value will
depend on your individual circumstances. If you have questions relating to
your specific tax situation, please contact your tax adviser.

Important information

This article is designed for use by, and is directed only at, persons resident
in the UK.

If you are not sure of the suitability or appropriateness of any investment,

product or service you should consult an authorised financial adviser.
Please note this may incur a charge.

The information contained in this article is not to be regarded as an offer to

buy or sell or the solicitation of any offer to buy or sell securities in any
jurisdiction where such an offer or solicitation is against the law, or to
anyone to whom it is unlawful to make such an offer or solicitation, or if
the person making the offer or solicitation is not qualified to do so. 

The information in this article does not constitute legal, tax, or investment
advice. You must not, therefore, rely on the content of this article when
making any investment decisions.

Issued by Vanguard Asset Management Limited, which is authorised and

regulated in the UK by the Financial Conduct Authority.

© 2023 Vanguard Asset Management Limited. All rights reserved.

Get updates from Vanguard

https://www.vanguardinvestor.co.uk/articles/latest-thoughts/investing-success/everything-you-need-to-know-about-the-tax-year-end 5/6
19/02/2023, 17:19 Everything you need to know about the tax year-end| Vanguard UK Investor

Sign up for monthly stories and investing tips.

Enter your full name

Enter your email address

Sign me up

This website is designed to give you information on the products and services
offered by Vanguard. If you are unsure whether these are suitable for you,
please speak to a financial adviser. Past performance is not a reliable indicator
of future returns. The value of investments, and the income from them, may fall
or rise and you might get back less than you invested.

© 2023 Vanguard Asset Management, Limited. All rights reserved.

Issued by Vanguard Asset Management, Limited which is authorised and regulated in the UK by
the Financial Conduct Authority. ​Information about us can be found on the Financial Services
Register
(register number 527839).

Your use of this site signifies that you accept our Terms and Conditions Privacy
Policy Important Investment Information Security Cookie Policy Press

<https://www.vanguard.co.uk/uk/portal/pressroom/press-releases> Help Modern Slavery Act

Statement Section 172 Statement

https://www.vanguardinvestor.co.uk/articles/latest-thoughts/investing-success/everything-you-need-to-know-about-the-tax-year-end 6/6