Last Friday - April 6th - marked the start of the new tax year. Each year the UK gov changes the rules. Depending on their view of the economy, it results in you paying or receiving more or less tax across a range of things. Here’s a speedy overview of the changes.
You will receive a ‘little’ more in your monthly take-home salary. This is because income tax bands have increased.
Your Personal Allowance, that’s the amount you can receive at zero tax, has gone up from £11,500 to £11,850.
The Basic rate tax band, which is where you pay 20% tax, has also increased. This means you now have to earn over £46,350 before paying the higher rate (40% tax). Last year, the higher band started at a lower threshold of £45,000.
Side note: Income tax works in bands which means you pay different rates on different portions of your money. We have a guide for that.
How much extra money will you get?
The price of a posh dinner for two or a yearly subscription to Netflix is equivalent to the extra money most of us will get.
If you are a Basic rate tax payer, you will get £70 more a year. And if you are a Higher rate tax payer you will earn up to £240 extra a year.
The bad news?
This extra money will be lost to inflation. That is, the cost of buying everyday items like food and petrol is rising faster than the amount you will gain.
And, we hate to be the bearer of more bad news but council tax is going up by 5.1% on average across England. Londoners will pay an extra £55 a year on average whilst county council areas will pay £86 more.
Any good news?
Yeap! The inheritance tax-break on homes has increased, minimum wage has gone up, student loans don't have to be paid back so soon and everyone employed now gets a pension. Here’s the details...
Inheritance Tax... If passing on an property to your decedents, you pay no tax on the first £450,000 (or £900,000 per couple). Anything above that you pay a whopping 40%!
Pensions... Under the new auto-enrolment policy every company, large or small, has to set-up a pension scheme for their employees. This means at least 4.4% goes into your pension each year, 2.4% from you and 2% from your employer.
Minimum Wage... Going up for all age brackets. If you are 25 or over it’s up from £7.50 to £7.83 (that's a decent 4.4% increase).
Student Loans... If you took a loan before September 2012 you can earn £18,330 before having to make repayments and if you took a loan after this, you can earn £25,000 before you paying back (before it was £21,000). Note this is for English and Welsh students only.
What else has changed?
If you own a company or you own shares for investment reasons and receive dividends, your tax-free entitlement has gone down from £5,000 to £2,000. Dividend amounts above this are taxed depending on the sum of all your income. But these rates are less than income tax. We have a guide for that.
Finally, if you’ve been thinking of a way to cut down on fizzy drinks saving money could be your ticket. Drinks with a high amount of sugar are now taxed more at around 8p more per can. Although many of the soft drinks have slashed their sugar levels to avoid the higher tax!