Tax incentives in the UK for personal savings and investments are projected to hit £35bn this year as the government encourages people to save, according to Bowmore Financial Planning.

Personal finance tax incentives that have seen rises over the past year include:

•  Personal Savings Allowance relief will have increased by 40% during the 2022/23 tax year from £350 million to £590 million due to higher interest rates.

  • Tax incentives for ISAs also will have increased by 17% from £3.5bn to £4.3bn over the same period also partly due to higher interest rates.

The research also noted that 77% of personal finance tax incentives are for pension schemes, which are projected to be worth £27bn to taxpayers in the 2023/24 tax year.

The government recently removed the Lifetime Allowance charges ahead of the allowance being abolished next year. The maximum amount a person can save into their pensions each year without taxation has also risen from £40,000 to £60,000.

Meanwhile, there has also been an increase in the money purchase annual allowance, meaning individuals can now draw a maximum of £10,000 from their pensions without additional charge, compared to the previous £4,000 maximum. These changes will add an extra £4.5bn to pensions tax incentives offered between 2022/23 and 2027/28.

The research also showed that personal finance tax breaks continue to increase but remains slow at 4%, half the percentage increase between the 2020/21 and 2021/22 tax years.

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