Martin Lewis returned to screens on Tuesday night (November 22) to deliver his last self-titled ITV show of the year. The Money Saving Expert founder returned to host the hit programme The Martin Lewis Money Show Live, which is now in its 12th series, where he gives advice to viewers amid the crippling cost of living.
In last night's hour long show, the financial guru covered everything from important information and changes after the Autumn Statement to giving help and advice with rising energy bills and tax.
Martin also answered a variety of questions from viewers as well as asking his expert panel for their knowledgeable advice. Amongst the top tips given, the money-saving expert addressed income tax and how this would be affected in April 2023 following the recent budget.
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Starting by showing a graph with the rates of tax per income, Martin explained: "The way it works is most people can earn up to £12,570 a year and they don't pay any tax or any national insurance. That's your personal allowance.
"For everything you earn above that you pay 20 percent income tax and 12 percent national insurance. So 32% of all earnings about that amount disappear.
"That carries on until we get to the high tax rate threshold where the tax goes up to 40% and the national insurance drops to 2%, so you are now paying 42 percent.
"You keep paying that for every pound of earnings until you get to £100,000. Once you get to this, I know it doesn't affect most people, you start to lose that personal allowance so the amount you can earn tax free. That gives you an effective marginal tax rate in the 60 percent bracket, higher than any other earning level.
"That stops at £125,000 where you can back to the 42 percent and then the the 45 percent of tax hits for earnings above £150,000."
He then showed another graph and explained that from what we've heard in the budget, in April 2023 these margins will change slightly.
"Not much has changed, in fact the only difference is that the top rate of tax will start at £125,140 rather than £150,000. The big change here is that there is no change - this is called fiscal drag.
"What this means is that wages are going up next year by around 6 percent but inflation is at 11 percent, so even though you're earning 6 percent more, things cost 11 percent more so in real terms it is a pay cut.
"But what this means is that because the threshold is frozen, now you're getting more tax taken from you which was not happening this year. So your pay has gone up and now you're starting to lose in tax."
Tax specialist Rebecca Benneyworth then answered some questions from viewers, with one saying that they were over taxed by more than £800.
She then explained that if the viewer has an X on the end of her tax code, she is on emergency tax which would then mean she would be paying more.
Martin then urged: "If you've got the wrong tax code, go to the HMRC.
"Each year you're sent your tax code if you're an employee. The standard one is 1257L. What that actually means is £12,570 which is how much you can earn tax-free.
"Millions of people are on the wrong tax code. Some are overpaying and are therefore due thousands of pounds back, some are underpaying and are therefore going to get a shock as they're asked for more money.
"So it's really important that you check because it's your legal responsibility, not HMRC, not your employer's responsibility. There are tools online which will give you a rough idea if you're on the right tax code in your circumstances."
Here is a useful tool on the MoneySavingExpert website which advises you how to check your tax code.
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