The ultimate guide to the UK’s tax allowance in 2022

by | Sep 20, 2022 | Knowledge Center | 0 comments

A tax allowance is an aggregated amount that is deducted from your total income when calculating your taxable income. This includes the National Insurance payment as well.

What is the UK tax allowance for 2022? This is a question that many people are asking as the date draws nearer.  In this blog post, we will explore what the tax allowance is and how it might change in the coming years. We will also provide some tips on how to make the most of your tax allowance. So, if you want to find out more about this topic, keep reading!

There are a number of tax allowances in 2022 that you may be eligible for in the UK. Here is a rundown of some of the most common ones:

Personal Tax Allowance in 2022

The Personal Allowance is the amount of income you can earn before you start paying income tax. For the 2021/2022 tax year, the Personal Allowance is £12,570. This means that if your annual income is less than £12,570, you will not have to pay any direct tax (income tax) on it.

If your annual income is more than £12,570, you will start paying income tax on the excess at the following tax brackets:

  • Income between £12,571 and £50,270: 20%
  • Revenue between £50,271 and £150,000: 40%
  • Earnings over £150,000: 45%

If you earn more than £12,500 in a year, you will start paying income tax at the basic rate of 20%. This means that if you earn £15,000 in a year, you will pay £2,500 in income tax (20% of £15,000).

If you are a higher earner, you will start paying income tax at a higher rate of 40%. This means that if you earn £50,000 in a year, you will pay £15,000 in income tax (40% of £50,000).

Marriage Tax Allowance in 2022

The Marriage Allowance is a little-known tax break that can save couples money. Basically, it allows you to transfer 10% of your Personal Allowance to your spouse or civil partner, as long as they earn less than you. This can reduce their income tax bill by up to £1,257 per year.

To be eligible for the marriage tax allowance, you must be:

-Married or in a civil partnership

-Living with your spouse or civil partner

– Earning less than £11,850 in the tax year (2018/19)

If your spouse or civil partner is a higher earner, they may be able to transfer some of their Personal Allowance to you. This is known as the marriage tax allowance in 2022.

The best part is that it’s easy to set up – all you need to do is go online and fill out a simple form. So if you’re looking for a way to reduce your tax bill, be sure to take advantage of the Marriage Allowance.

Blind Person Tax Allowance in 2022

There is also a Blind Person’s Allowance of £2,690 which is available for people who have registered for vision impairment. This allowance is in addition to the Personal Allowance and can reduce the amount of income tax you pay by up to £338 per year. This is known as the Blind Person’s Tax Allowance in 2022 (BPTA).

To qualify for the BPTA, you must meet certain criteria. You must:

  • Be aged 16 or over
  • Be registered as blind or partially sighted with a local authority or hospital
  • Have a vision in both eyes that is classed as ‘severely impaired’, meaning that your level of sight is less than 6/60

If you think you may be eligible for the BPTA, you can apply by completing a self-assessment tax return or by contacting HM Revenue and Customs (HMRC).

If you’re awarded the BPTA, it will be given as a deduction from your total taxable income. This means that you’ll pay less income tax overall.

The BPTA is just one of a number of benefits and allowances that are available to blind and partially sighted people in the UK. Others include the Disability Living Allowance (DLA) and the Personal Independence Payment (PIP).

Capital Gains Tax Allowance in 2022

If you’re a UK resident, you may be eligible for a Capital Allowance on tax if you sell certain assets. The capital allowance is £12,000 for the 2020/21 tax year.

This means that you won’t have to pay any Capital Gains Tax on the first £12,000 of gains you make from selling assets such as property, shares or investments. If your gains are higher than this, you’ll only pay Capital Gains Tax on the amount above the allowance.

Capital Gains Tax is a tax on the profit you make when you sell (or ‘dispose of’) something you own. The rate of Capital Gains Tax you pay depends on your total taxable income and how much profit you make from the sale.

If you’re a higher or additional rate taxpayer, you’ll pay 28% Capital Gains Tax on any gains above your allowance. You’ll pay 18% on any gains above your allowance if you’re a basic rate taxpayer.

There are some assets that are exempt from Capital Gains Tax, such as your main home or certain types of investments, like ISAs and PEPs.

You can use your Capital Gains Tax Allowance to reduce the amount of tax you pay on profits from the sale of other assets, such as:

  • Second homes
  • Buy-to-let properties
  • Investments held outside of ISAs or PEPs
  • Shares that are not in an ISA or PEP

If you make a loss when you dispose of an asset, you may be able to use this to reduce your Capital Gains Tax bill on other profits you make in that tax year.

The deadline for paying Capital Gains Tax is 31 January following the tax year in which you made the gain. For example, if you sell an asset on 1 September 2020, the deadline for paying any Capital Gains Tax due would-be 31 January 2022.

Inheritance Tax Allowance in 2022

If you are a UK resident, you may be eligible for an inheritance tax allowance if you inherit money or property from someone who has died. The amount of the allowance depends on your relationship with the deceased person.

For example, spouses and civil partners usually receive an inheritance tax allowance of £325,000. This means that if you inherit money or property worth up to £325,000 from your spouse or civil partner, you will not have to pay any inheritance tax on it.

If the value of the money or property you inherit is more than £325,000, you will only have to pay inheritance tax on the amount above this threshold. The rate of inheritance tax is currently 40%.

You may receive a lesser tax allowance in 2022 if you are not married or in a civil partnership. For example, if a deceased person’s next-of-kin will only inherit the tax allowance of £250,000.

However, under specific circumstances, you can also receive a larger inheritance tax allowance in 2022. For example, if the deceased person owned property, their next-of-kins can receive an inheritance tax allowance of £425,000.

There are also a number of allowances for specific circumstances, such as if you are a charity worker or if you have certain medical conditions. You can check with HMRC to see if you are eligible for any of these.

There is also writing down allowance that you need to familiarise yourself with, which you can use over a period of several years on assets that do not qualify for other deductions.

Wrapping up

This guide should give you a good understanding of the UK tax allowance for 2022. You must note that this information is subject to change. You must consult with an accountant or other financial professional if you have any specific questions.

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