Will YOU get a tax cut this year?

Millions will see their take-home pay rise on Friday — but savers and landlords will lose. Now find out where you stand . . .

THE new tax year starts on friday — and with it comes a hotchpotch of changes to the tax rules which makes the system even more complicated. There are some winners and some losers. Investors face a raid on their dividends incomes, buy-to-let landlords face higher tax bills, homeowners will be able to pass more to their children without being hit by inheritance tax — and different income tax rates will apply in Scotland compared with the rest of the uK. Here, Money Mail runs through your new tax bands and rules for 2018-19.

INCOME TAX BILL TO FALL

MIllIoNS of workers are in for a tax cut of up to £472 a year. The amount of money you can earn before paying any tax at all — the personal allowance — goes up from £11,500 to £11,850.

The rate of tax, 20 pc for basic-rate payers, 40 pc for higher-rate payers and 45 pc for additional-rate payers, stays the same except in Scotland (see below).

The 40 pc rate kicks in once your taxable earnings reach £ 46,351 (£34,501 plus your personal allowance of £11,850). The 45 pc additional rate tax still starts when your taxable income reaches £150,000. Higher earners continue to see their personal allowance fall by £1 for every £2 they earn above £100,000.

The higher personal allowance, announced in the November Budget means a basic-rate taxpayer on £30,000 will save £101 a year.

A higher-rate payer who earns £50,000 will be £236 better off, calculations from accountancy firm Deloitte show. A married couple with both partners working on £100,000 will be £472 a year better off (see table).

National Insurance Contribution rates stay the same but thresholds have changed a little.

The lower threshold when you start paying 12 pc rises to £8,424, and you will now pay 2 pc on anything above £46,350.

TAX DIVIDE ON SCOTTISH BORDER

If you live in Scotland, then your rates are different. The Scotland Act 2016 lets the Scottish Parliament set all income tax rates and bands — but not the personal allowance. That will be £11,850, as in England.

Scottish taxpayers now face five different bands: 19 pc, 20 pc, 21 pc, 41 pc and 46 pc.

The new starter rate of 19 pc is paid on income between £11,850 and £13,850.

The basic 20 pc applies between £13,850 and £24,000. Then there is the new ‘ intermediate’ 21 pc rate between £24,000 and £43,430 before the 41 pc higher rate kicks in at £43,430 to £150,000. Above this you pay the ‘top rate’ of 46 pc.

That means someone in Berwick-upon-Tweed, Northumberland, will pay less than someone a few miles north in Mordington, Berwickshire.

These new rates apply to ‘ nonsavings income’, which basically means earnings and pensions.

The tax rates and bands for savings and dividend income continues to be set by Westminster, so Scottish taxpayers will get the same allowances on the same levels of interest and dividends as the rest of the uK.

But with Gift Aid relief, Scottish rates will apply. How pension tax relief will work in the long term is still being thrashed out.

But for the 2018 to 2019 tax year, Scottish taxpayers who receive relief on their contributions at source will continue to receive relief at 20 pc even if they pay tax at 19 pc. If you pay tax at a higher rate, you can claim additional relief.

Patricia Mock, tax director at accountant Deloitte, says: ‘The divergence of Scottish tax bands and rates for earned income from those of the rest of the uK may cause confusion.

‘Scottish taxpayers earning more than £26,000 will have a higher liability compared to residents elsewhere in the uK.’

Quentin Holt, tax manager at PricewaterhouseCoopers, says: ‘The changes to the Scottish tax rates and bands add an additional layer of complexity to the tax system and introduce some anomalies which could easily catch out taxpayers.

‘for example, a Scottish taxpayer can find they are not eligible for the transfer of the marriage allowance despite earning the same as someone south of the border.’

SAVERS FACE RAID ON DIVIDENDS

ABouT 2.27 million people face paying more tax on their investments. Currently, you can have up to £5,000 of dividends in the financial year ending on Thursday (April 5) without any tax. It comes on top of any dividends from your Isas.

This is called the dividend allowance and it applies to shares held outside an Isa.

from the next tax year, the allowance is falling to £2,000. That means you will pay tax on any dividends above this amount from shares held outside Isas.

you’ll pay 7.5 pc as a basic-rate taxpayer. for higher and additionalrate taxpayers, the tax is 32.5 pc and 38.1 pc.

Someone receiving £5,000 of dividends a year now pays no tax. But next year they will pay £225, £975 or £ 1,143 extra — depending on whether they are a basic, higher or additional-rate taxpayer. That will make it more important to use an Isa as a longterm investment bolt- hole, as all income from these is tax-free.

Meanwhile, the personal savings allowance is remaining the same. Basic-rate taxpayers can earn their first £ 1,000 interest tax free in ordinary, non-Isa accounts. Higherrate taxpayers have a £500 allowance while those who are caught in the top- rate tax band get no allowance at all.

If interest rates rise this year, as predicted, more people could find their returns take them above these thresholds.

The starting-rate band for savings income for low earners remains at £5,000.

It is designed to help savers with lower incomes — such as pensioners, part-time workers, and non-working adults — whose interest from their savings takes them above the normal personal allowance. The capital gains tax

allowance is rising by £400 to £11,700, an increase of £400.

BETTER PERKS FOR BEING MARRIED

THE tax saving of using the marriage allowance increases marginally from £230 to £238. The marriage allowance lets a non- taxpaying partner transfer 10 pc of their annual personal allowance to their basic rate taxpaying other half. In a further change, you can apply for this allowance where your partner died before any claim was made, backdated for up to four years. The married couple’s allowance, where one partner was born on or before April 5, 1935, rises from between £336 and £869.50 depending on your income, up from £326 to £844.50. You can’t claim both allowances and most pensioners who are old enough will be better off going for this one.

ISA BOOST FOR CHILDREN

THe annual Isa subscription stays at £20,000 for the next tax year.

You can split your allowance between cash, stocks and shares and so-called Innovative Finance Isas, or put up to £4,000 in a Lifetime Isa. The limit on Help to Buy Isa stays at a maximum £250 a month.

But the Junior Isa limit rises to £4,260, up from its current £4,128.

Those aged 16 and 17 can still get two Isa allowances as they can open a Junior Isa and an adult cash Isa.

Tax rules on Isas when a holder dies are also changing. Currently, on the death of an Isa holder, the Isa wrapper disappears so any income or capital gains become taxable.

But if an Isa holder dies on, or after, April 6 this year, the Isa will keep its tax-free status until the administration of the estate is finalised, the account is closed or three years after death, whichever is the earlier.

PENSIONS CAN GROW BIGGER

THe lifetime allowance for pension savings will increase in line with inflation, rising to £1,030,000 for 2018-19. It is the amount of money you can take from your pension without triggering extra tax. It applies to the total of all the pensions you have, but excludes your state Pension.

The maximum amount you can put into your pension each year is £40,000.

PASS ON THE FAMILY HOME . . . TAX-FREE

THe inheritance tax allowance on which you pay no tax stays at £325,000, or £650,000 for spouses and civil partners. Anything above this is taxed at 40 pc.

on top, there is the main residence allowance which rises to £125,000 from £ 100,000. It only applies to money tied up in your main residence and can only be left to direct descendants — children, grandchildren, step, adopted or foster children. You cannot use the allowance to leave wealth to nieces, nephews or other relatives.

The allowance is set to rise to £150,000 in the 2019-20 tax year, and £175,000 in the following one.

You can also use this allowance if you downsized after July 8, 2015 and pass on money from the sale to your direct descendants when you die.

The residence allowance starts to be withdrawn once joint assets exceed £2 million.

The annual gift exemption of £3,000 is unchanged, as is the wedding or civil ceremony gifts of up to £1,000 per person (£2,500 for a grandchild or great-grandchild, £5,000 for a child) and as many small gifts up to £250 per person as long as you haven’t used another exemption on the same person.

BUY-TO-LET LANDLORD BLOW

IF YoU are a higher-rate taxpayer and have bought a rental property with a mortgage, you’ll pay more tax from April 6, when the second stage of cutting tax relief comes in.

This tax year, landlords can claim three- quarters of their mortgage interest at their higher rate of tax, and a quarter at the lower basic-rate tax. From next week, you can only claim higher-rate relief on half your costs and the other half at basic rate.

Further tax hikes will come in the following tax years. In 2019-2020, the amount of relief you can claim at the higher rate reduces to a quarter of your mortgage interest, and by the 2020-2021 tax year, higher-rate relief disappears completely.

From then, you can only claim basic- rate tax relief on all your mortgage interest payments.

And in a double whammy, the changes could have a knock-on effect on your income tax band.

‘ This new rule could make a considerable difference to higherrate payers with high level of borrowings,’ says Patricia mock.

‘Adding the whole of the rent you receive to your income could push you up into a higher-rate bracket and start to lose your personal allowance and child benefit.’

In the past, you simply deducted your mortgage interest costs from property income and added this net figure to your income to work out your tax rate.

now you need to put the whole of your rental income when totting up your income and get the basic-rate reduction on your tax bill for your mortgage costs.

PricewaterhouseCoopers figures show that under the old system if you had mortgage interest of £9,000 a year and rental income of £10,000, as a higher-rate taxpayer you paid 40pc tax on your £1,000 profit — or £400.

once the new system is fully introduced, you’ll pay 40 pc on your £10,000 rental income and in return get only 20 pc basic-rate tax relief on the whole of your mortgage interest which you take off your tax bill.

The tax works out at £4,000 and the 20 pc relief on £9,000 at £1,800, leaving £2,200. Hm Revenue and Customs estimates it will see £225 million extra in tax between April 2018 and April 2019, and a tax grab of £665 million by the time the higherrate relief is phased out altogether.