Your wealth is under attack – this is how much you will lose

Britain’s tax burden was already at the highest level since the Second World War before Chancellor Jeremy Hunt introduced a series of damaging changes in April 2023.

Thousands more of us have been forced to pay the top-rate of income tax, and tax-free allowances for capital gains and dividends were slashed in half. Council tax bills have also risen.

Use Telegraph Money’s calculators below to find out how much the new tax year could cost you, and what you can do about it.

Income tax 

The threshold at which taxpayers enter the top rate (45pc) of income tax has been slashed from £150,000 down to £125,140. 

This is the first time the additional rate threshold has been changed since it was introduced in 2010. The cut will bring 350,000 extra taxpayers into the top 45p rate over the next five years – 47 per cent more, compared to if the threshold had remained at £150,000, according to the Office for Budget Responsibility. 

Use our calculator below to see how much the income tax increase will cost you. While income tax has increased for higher earners, many people may actually be better off in the new tax year compared to 2022-23.

This is because Boris Johnson’s Health and Social Care Levy (a new tax on top of National Insurance) was scrapped by Kwasi Kwarteng in his brief stint as Chancellor. Secondly, the starting point where NI begins to be paid was raised in July 2022. The combined effect means that NI bills will be lower this year, offsetting income tax rises. Over time, of course, the amount of income tax paid will rise dramatically because the various thresholds have been frozen until 2028. 

One in three higher earners are potentially unaware they will be dragged into the top rate of tax, according to research by Barclays Wealth. 

A worker on £145,000, who was just underneath the previous threshold, will pay almost £1,000 more income tax this year as a result. Meanwhile a worker on £160,000 will be £1,243 worse off. 

To find out how new top-rate taxpayers can cut their bill, read Telegraph Money’s guide. 

Capital gains tax 

Investors and landlords have also been hit with higher bills as the capital gains tax allowance was heavily cut. 

The threshold at which capital gains are taxed plummet from £12,300 to £6,000, before halving to £3,000 in April 2024. 

Currently CGT is charged at 10pc on profits made from shares for basic rate taxpayers while higher earners pay 18pc. Those selling a property that is not their main residence face charges of 20pc and 28pc, respectively.

The cut to the allowances means a higher earner who makes a capital gain of £12,300 on a property in 2023-24 will pay an extra £1,764 in tax, compared to the previous tax year when there would have been no tax to pay. 

Use our calculator below to see how much the change will cost you if you are selling a second home or buy-to-let property, and read our guide to cutting your capital gains tax bill. 

Dividend tax

Investors and pensioners living off dividends will also pay more tax because this annual allowance has also been cut.

The allowance is being slashed from £2,000 to £1,000. It will then halve again to £500 in April 2024. 

As a result of the cut, around 635,000 people will pay tax on their dividends over the coming year according to a Freedom of Information request submitted to HM Revenue and Customs.

Basic-rate taxpayers pay dividend tax at 8.75pc but the rates are much higher for higher rate and additional rate taxpayers – who pay 33.75pc and 39.35pc respectively. 

HMRC says the cut will cost investors an average of £125 in 2023-24 and £155 in the following year.

It will cost a higher rate taxpayer £338 this year and £506 the next, according to the investment firm Quilter. Meanwhile an additional rate taxpayer will pay £394 extra and £590 the following. 

How much more tax you will pay depends on your marginal rate of income tax and your annual dividend income. Use our calculator below to see how you will be hit, and read our guide to cutting your dividends tax bill.

Council tax

Millions of households face a 5pc increase in their council tax bills after Mr Hunt enabled local authorities to raise levies by the maximum without holding a local referendum. 

Four in five local authorities opted to increase their rates by 5pc from 1 April 2023, adding £99 to the annual bill for a typical Band D rated property. 

You can use our calculator below to see how average bills are rising in your area, and how your local authority ranks for price rises. 

This article was first published on 6 April 2023