The new Tax Year starts this week (6th April) so here are the changes that you need to know about.
Personal Allowance, which is the amount that you can earn before you need to pay Income Tax is rising from £10,600 to £11,000. The threshold for paying the higher rate of income tax (40%) will rise from £42,385 to £43,000. From this April, there will be no extra allowance for taxpayers who are over the State Pension age.
Marriage Allowance is increasing from £1,060 to £1,100. Marriage allowance is a tax break which allows people to transfer a portion of their tax free allowance to their partner, providing that neither partner pays more than the basic rate of Income Tax.
National Living Wage
For employees over the age of 25, the National Living Wage will be introduced at the rate of £7.20 per hour. Workers under the age of 25 will continue to get minimum wage.
National Insurance rates will not be changed. However, there will be change in that ‘contracting out’ (which means paying into a company pension scheme will see the rate of NI contributions that you pay decrease) will be ended. As a result, employees who previously saw a reduction in their NI contributions will see them raised. The new National Insurance threshold is:
Class 1 National Insurance (employees) – payable on income between £8,060 and £43,000 at 12%. Above £43,000 the reduced rate of 2% applies.
Class 2 National Insurance (self-employed) – payable on income above £5,965 at £2.80 per week.
Class 4 National Insurance (self-employed) – payable on income between £8,060 and £43,000 at 9%. Above £43,000 the reduced rate of 2% applies.
The limit that your household income can increase in a year before it affects your tax credits entitlement will decrease from £5000 to £2500.
Personal Savings Allowance
People with savings will get a new allowance from April. The first £1000 of savings interest will be tax free for taxpayers who pay the basic rate. For higher rate taxpayers, the first £500 will be tax free.
There will be a new £5000 tax free dividend allowance for people who are investors. Any dividends above this level will be taxed according to your tax bracket.
Capital Gains Tax
Rates of Capital Gains Tax for some people will be cut from April. For basic taxpayers, it will fall from 20% to 10%. For higher rate tax payers, it will fall from 28% to 18%. CGT rates on property sales will remain unchanged.
From April, people who are looking to buy a second home or invest in buy to let properties will have to pay a 3% surcharge on existing Stamp Duty rates.
Basic state pension will rise from £115.95 to £119.30 a week.
The childcare costs element of Universal Credit is set to change. You will be able to claim back 85% of monthly childcare costs up to a limit of £646.35 for one child or £1,108.04 for two or more. The Work Allowance limit is also changing, according to whether you are single or in a couple and how many children you have.
The premium Income Support available for couples of pension age is rising from £116 to £122.70 a week.
Dental Charges for NHS Patients
Dental charges for NHS treatments will rise by 5%.
For more information about tax year changes, visit the HMRC website or give them a call.