Direct taxes: rates and allowances 2023/24

This briefing sets out direct tax rates and principal tax allowances for the 2023/24 tax year, as confirmed in the Spring Budget 2023 on 15 March 2023. It also includes changes to the rates of National Insurance contributions announced at Autumn Statement 2023.

It outlines the conditions necessary for eligibility for these tax allowances and provides a summary of the general tax position in straightforward cases.

This briefing deals with tax allowances, but not with cash benefits provided under the social security system, the child tax credit or the working tax credit.

Income tax

Income tax on earned income is charged at three rates: the basic rate, the higher rate and the additional rate.

For 2023/24 these three rates are 20%, 40% and 45% respectively.

Tax is charged on ‘taxable income’ at the basic rate up to the basic rate limit, set at £37,700. ‘Taxable income’ excludes personal allowances, which represent the amount of money someone may receive free of tax. Tax is charged at the higher rate on taxable income between the basic rate limit and the higher rate limit, set at £125,140. The additional rate is charged on taxable income over £125,140.

All three tax rates are unchanged from 2022/23.

Personal allowance

The personal allowance is set at £12,570 for 2023/24. Both the personal allowance and the basic rate limit have been fixed in value from 2021/22. The higher rate threshold – the point at which individuals become liable to pay tax at the higher rate – remains unchanged at £50,270 for 2023/24.

Marriage allowance

Married couples and civil partners may be entitled to claim the marriage allowance. Individuals whose income is insufficient to make full use of their personal allowance may transfer this unused fraction to their spouse or civil partner, up to a set amount. Individuals cannot make use of this provision if their spouse or partner pays more than the basic rate of tax. For 2023/24 the maximum that can be transferred is £1,260.

National Insurance contributions

Between 6 April 2023 and 5 January 2024, the rate of National Insurance contributions (NICs) for employees was set at 12% on all earnings between the primary threshold and the upper earnings limit. From 6 January 2024, the main rate is cut to 10%. Earnings above the upper earnings limit are charged at a 2% rate. For employers, the rate of NICs is set at 13.8% on earnings above the secondary threshold. The employer rate is unchanged from 2022/23.

The primary threshold is set at £242 per week for 2023/24. The secondary threshold is set at £175 per week for 2023/24. The upper earnings limit is set at £967 per week for 2023/24, so that it remains aligned with the income tax higher rate threshold. All three thresholds are unchanged from 2022/23.

Between 2022 and 2024 the rates of NICs for both employees and employers, as well as the primary threshold for employees, were changed:

• In the Spring Statement 2022 the then Chancellor Rishi Sunak announced that the primary threshold, set at £190 from 6 April 2022, would be increased to £242 from 6 July 2022. This measure was to mitigate the impact of the 1.25 percentage point rise in NICs rates for 2022/23, which represented the first stage in the introduction of a new tax: the Health and Social Care Levy.
• On 22 September 2022 the then Chancellor Kwasi Kwarteng announced that the 1.25 percentage point rise in NICs rates would be reversed from 6 November 2022, while the Health and Social Care Levy would be cancelled. The Library briefing on the legislation which repealed the Health and Social Levy has more details on these changes.
• In the Autumn Statement 2023, Chancellor Jeremy Hunt announced a reduction in the rate of Class 1 employee NICs from 12% to 10% as of 6 January 2024. The Library has written a briefing on the legislation that enacted this change.

Further information

Details of tax rates and allowances as well as tax credits for the 2023/24 year are set out in Annex A to HM Treasury, Overview of Tax Legislation and Rates, November 2023 published alongside the Autumn Statement 2023.