A year of give and take
FIVE-MINUTE GUIDE TO... HOW THE NEW TAX RULES AFFECT YOU
TODAY is the final day of the financial year, so if you have not yet taken advantage of this year’s tax-free Isa allowance, you have to act by midnight.
Many banks, building societies and investment platforms allow last-minute online applications, just make sure you have a debit card and your National Insurance number to hand.
Tomorrow is April 6, the start of the new tax year, when every adult gets a brandnew £20,000 Isa allowance, while a host of other tax changes come into force.
Perhaps the most striking change will see married couples able to leave property worth up to £1 million to their family, without paying any inheritance tax (IHT).
The basic IHT allowance is £325,000, and has been frozen at that rate since 2009. Married couples or civil partners can inherit each other’s allowance, to pass on £650,000 tax-free in total.
The main residence nil-rate band comes on top of that, allowing people to pass on their family home to direct descendants including children, grandchildren, stepchildren and adopted or foster children.
From tomorrow, it will rise by £25,000 to £175,000 per person, said Elspeth Neilson, private client partner at Osbornes
Law: “This allows a married couple to pass on up to £1 million tax-free, as long as the family home is included.”
Those without children will not benefit, as property left to nieces, nephews, siblings, friends or unmarried partners is not eligible for the extra allowance.
“It tapers off for estates above £2 million,” she added.
The capital gains tax allowance also increases tomorrow, with the amount you can receive before facing a bill climbing from £12,000 to £12,300.The
Junior Isa allowance for children sees a more dramatic rise, more than doubling from £4,368 to a generous £9,000.
AJ Bell personal finance analyst Laura Suter said a newborn child could have a tax-free pot worth £240,000 by 18.This assumes family and friends invest £9,000 annually and the money grows 4 per cent a year after charges.
“The average Junior Isa contribution is less than £1,000 a year, so few families can afford the maximum amount,” Suter added.
The National Insurance cut confirmed in Chancellor Rishi Sunak’s Budget last month also comes into force on Monday. “The threshold at which you pay NI will rise from £8,632 to £9,500, saving around 31 million workers on average
£85 a year,” Suter said.
The State Pension increases from tomorrow, by an inflation-busting 4 per cent, thanks to the triple-lock guarantee. This guarantees the pension will rise either by prices, 2.5 per cent or, as is the case this year, earnings.
Those on the old State Pension will get an extra £5.05 as their income rises to a maximum £134.25 a week, while those on the new State Pension will pocket £6.60, receiving up to £175.20 a week.
Life will get more expensive for buy-to-let investors, as tax relief on mortgage interest is trimmed back again, so that everyone now gets the basic rate of 20 per cent, in a blow for those who pay tax at 40 or 45 per cent.
Second homeowners face new taxes that will push up their overall capital gains tax bill, Suter added.