Can the new tax year changes help me?
QI’ve heard that I’ll be better off in the new tax year, but can you explain why?
Jenny, Surrey
Faith says: The new tax year on April 6 brings a raft of changes to tax and benefits, which could result in both cash boosts and bigger bills.
The good news is that the State Pension is going up by more than 10%, so those on the full new State Pension will see their payments increase from £185.15 to £203.85 a week, while people who reached State Pension age before April 2016 will get £156.20 a week, up from £141.85. Other benefits rising by 10.1% include Pension Credit, Universal Credit, Child Benefit, Carer’s Allowance and Personal Independence Payments.
There will also be a new round of support towards sky-high energy bills. Pensioners will receive an extra £300 cost of living payment on top of their Winter Fuel Payment, while those receiving disability benefits such as Attendance Allowance will get an extra £150. Households on means-tested benefits such as Universal Credit and Pension Credit will get £900 paid in three chunks.
However, Council Tax bills are likely to shoot up higher than in previous years, by a maximum of 5% rather than the previous limit of 2%.
The amount of income you can earn before paying 20% basic rate tax is still frozen at £12, 570 a year, while the starting point for 40% higher rate remains at £50,270. High earners also face 45% tax kicking in on income above £125,140 a year rather than only from £150,000.
Laura Suter from AJ Bell said: “The deep freeze on income tax bands means that anyone who gets a payrise could be hit with a higher tax rate, as well as potentially losing certain allowances, such as Child Benefit or their personal allowance.”
The amount of dividends you can earn each tax year before paying tax is also being cut, halved from £2,000 each tax year to £1,000. Similarly, the amount you can earn in investment gains before paying Capital Gains Tax (CGT) is being slashed from £12,300 each tax year to £6,000. If you want to protect investments from the tax man, stash your money in ISAs or pensions.
House price hikes mean that in future more families than ever will have to pay inheritance tax (IHT). The thresholds have been frozen until 2028 Got a burning money question? We’d love to help, so please write or email us using the contact details on page 3