Are you celebrating the new tax year?

Wednesday 6th April marked the start of the new tax year. With it came tax and benefits changes designed to hit the deficit hard. But will they do the same to your finances?

A taxing time

The personal allowance has risen by £1,000 to £7,475, freeing thousands from income tax. But it’s not all good news. The basic rate limit has fallen from £37,401 to £35,001. So many more people have now become higher-rate taxpayers.

National insurance is also biting harder, with the employee contribution rate rising from 11% to 12%. If you earn more than £817 a week, your contribution over the upper earnings limit will also rise from 1% to 2%.

On the home front, people buying residential property costing over £1 million face a new stamp duty rate of 5%. That’s at least £50,000 going straight to the government’s coffers. And if you own furnished holiday lettings, you can’t offset losses against your other income in the same tax year.

It’s slightly better news for businesses. Corporation tax reduced by 2% at the start of April, with further falls to come.

Preparing for retirement

The days of being able to contribute a generous £255,000 a year tax-free in a pension are over. From 6 April, the limit on tax-relief for pension contributions is £50,000. However, pensioners will be pleased to know they no longer have to buy an annuity when they’re 75.

The basic state pension will increase by £4.50 to £102.15 a week. This will rise each year in line with average earnings, the Consumer Prices Index, or 2.5% – whichever is highest.

Boosting your tax-free savings

The amount you can save tax-free in an Individual Savings Account (ISA) has risen to £10,680. You can save half of this in a cash ISA or, for potentially higher returns, save the full amount in a stocks and shares ISA.

Tax credits for families

Thresholds in the tax credits system have changed. In short, people’s payments will reduce faster as their income rises. High earners will also not be able to claim tax relief for employer-supported childcare. Additionally, the government has frozen child benefit for three years, paying £20.30 a week for a first or only child and £13.40 for each other child.

The new tax year may bring mixed fortunes to your finances. So it’s wise to get your financial situation in shape. At Welbeck Group, we can help you make the most of your money, not just over the next twelve months, but for years to come.

This blog is for information only and doesn't constitute advice. It is based on our opinion and understanding of legislative and regulatory aspects in the financial marketplace. We strongly recommend you seek professional advice before taking any course of action.