Five nifty ways to pay less tax

Everything you need to know to get a boost from the other allowances you get this year

THe start of the new tax year brings with it a raft of changes and new rules that will affect how you manage your finances.

Here, we take you through everything you need to know about changing tax allowances, limits and perks.

PERSONAL ALLOWANCE AND INCOME TAX

THe amount of money you can earn before paying any income tax will increase from £11,000 to £11,500 tomorrow.

If you earn more than this you will pay 20 pc tax on anything up to £45,000, which goes up from £43,000 today.

and after this you’ll owe 40 pc tax on any earnings above the higher-rate threshold, up to £150,000.

on earnings above this level, you’ll pay the top rate tax of 45 pc.

There will also be some changes to how National Insurance is charged for employees. It is currently charged at 12 pc on earnings between £8,060 and £43,000. above this you pay 2 pc.

But from tomorrow employees will pay 12pc on earnings between £8,164 and £45,000.

That means those earning more than £43,000 will be hit with a bigger National Insurance bill.

However, when you take into account the changes to both income tax and National Insurance, your payments are likely to fall. someone earning £25,000 will see their bill fall by £113 from £4,833 to £ 4,720 a year, according to calculations by Deloitte.

a worker earning £50,000 will see their total bill fall from £13,533 a year to £13,220 — a saving of £313.

In scotland, the rules are slightly different. The tax-free personal allowance is also rising to £11,500. The same National Insurance bands will also apply.

But above the personal income allowance, scottish taxpayers will still pay 20 pc tax on anything they earn up to £43,000 — the same as this year. This means that someone earning £25,000 a year will be £113 better off than last year after paying tax and National Insurance, while someone earning £50,000 will be £87 worse off.

RETIREMENT FUND’S NEW CAP

If you’ve taken advantage of the recent pension reforms to cash in some of your retirement fund, there is a new limit on how much you can put back into the pot.

The Government is cutting the amount you can reinvest once you’ v e taken money out from £10,000 to £4,000.

This is to stop people from recycling income back into a pension and benefiting from the tax relief twice. This measure might affect you if you are semi-retired — or if you plan to continue working part-time to top up your retirement fund.

If you are one of the lucky few who is still in a final salary pension scheme, you don’t need to worry as these restrictions don’t apply to you.

PENSIONS AND PERKS AT WORK

Tomorrow will bring a boost for savers seeking pensions advice. If your employer arranges for you to see a pensions adviser who charges a fee, you will pay no income tax on any charges you face up to £500. This is an increase from £150 today. However, the tax benefits for company cars and other workplace perks are being cut. The way the benefit is calculated has changed. on a car worth £25,000, in the next tax year you will typically pay £1,450 if you are a basic- rate tax payer, or £2,900 as a h igherrate taxpayer. This is an increase of £100 and £200 respectively on the tax you would have paid over the past year.

DUTY ON BUY TO LET PROPERTIES

LasT year the Government introduced an extra 3 pc stamp duty charge for people buying buy- to- let properties and second homes.

This year the tax grab continues. until now, landlords could deduct all mortgage interest from their rental income before working out their tax bill.

But from tomorrow, this tax perk is being scaled back.

By 2020 you will be able to claim tax relief only at the basic rate of 20 pc. The change only affects higher-rate taxpayers.

Currently, if you charged £12,000 in rent a year and paid £4,500 in interest to your bank, your tax bill would be £3,000.

But this will rise to £3,225 for higher-rate taxpayers over the next 12 months, says mortgage broker London & Country. By 2020, with tax changes in full force, your bill will be £3,900.

LESS TAX ON CAPITAL GAINS

THe amount of money you can make tax-free from cashing in shares or other investments held outside of an Isa will rise from £11,100 to £11,300.

This reflects the gain in the value of the investments since you bought them.

you get a single allowance across all your investments for the entire tax year. each year you get a fresh allowance.

any gains above this limit will be taxed at 10 pc if you are a basic-rate taxpayer or 20 pc if you are a higher-rate taxpayer.

If you are selling an investment property or second home, you will pay 18 pc as a basic-rate taxpayer or 28 pc as a higherrate taxpayer on any profit made over £11,300 this year.