While the beginning of April might conjure up dreams of long awaited spring sunshine and lighter evenings, it is also the start of a brand-new tax year in the UK. And that means various tax changes for everyone. The chances are that the new tax changes will make you richer if you’re already well off. Increases to the National Minimum Wage might help you if you’re at the lower end of the pay scale. However, council tax bills have risen sharply, and workers have to pay three times more into their pension.
Changes to income tax
Pretty much every taxpayer is better off following Income Tax changes. The threshold has risen from £11,500 to £11,850, saving BR (basic rate) tax payers around £70 per year. The higher rate tax threshold has gone from £45,000 to £46,350, saving approximately £336 per year.
While this sounds good on paper, these threshold increases have only risen by inflation. The Institute for Fiscal Studies (IFS) has pointed out that all other increases since 2010 have been higher.
Changes to Scottish tax
For the first time, this month sees taxpayers in Scotland paying different rates to England and Wales. People earning more than £33,000 (around 45% of the population) pay more income tax in Scotland, leaving 55% paying less.
Changes to National Minimum Wage
Minimum Wage rises, which have been in force since 1 April 2018, are above inflation for both those under and over 25. The biggest increase is for 18 to 20-year olds who get a 5.3% increase. People over 25 years old get a 4.4% increase (33p per hour).
Changes to student loans
From 6 April 2018, the threshold for students to start paying back their loans increased. Students in England and Wales who took out loans before Sept 2012 can now earn £18,330 before starting repayments. This applies to students in Northern Ireland and Scotland too, and is an increase from a threshold of £17,775. Anyone with loans from after 2012 will see their thresholds go up from £21,000 to £25,000.
Changes to Inheritance Tax (IHT)
Homeowners face less IHT following the changes. There is no increase for the main exemption amount of £325,000 but the extra exemption for property has risen from £100,000 to £125,000. This could mean a saving of up to £10,000 on IHT.
Changes to council tax
Across England council changes tax have led to a rise on average of 5.1%. As an example, an average band D property now costs £1,671 per year (that’s up £81 on 2017). People in London have seen an increase of £55, while people in county council areas are looking at an increase of £86.
All councils across Scotland are increasing council tax by the maximum allowed – 3%. Wales is being hit with the biggest rises due to the Welsh Assembly failing impose restrictions. Pembrokeshire tops the list with a rise of 12.5%.
Changes to pensions
From 6 April 2018, 9 million people with auto-enrolment pensions have to pay triple the amount of monthly contributions. This will be several hundred pounds more for most people, but they also get a 2% increase in payments from their employer.
The Pensions Lifetime Allowance rose from £1 million to £1,030,000. The allowance is the most you can have in your pension, and people with more than this must pay 55% tax on lump sum withdrawals and 25% on income withdrawals.
State pensioners have received a 3% rise since 9 April 2018, due to the triple lock mechanism put in place by the government.
Changes for savers
There are few positive changes for savers. A program called ‘Help to Save’, which was to give people on benefits a 50% top up has been postponed. It was supposed to launch this month but has been shifted to October.
ISA limits remain at £20,000, although the maximum amount for Junior ISAS has risen to £4,260, an increase of £132. The maximum you can get from share dividends with no tax has decreased from £5,000 to £2,000 per year. Basic Rate taxpayers are charged 7.5% on dividends over £2,000, while higher rate payers are now charged 32.5%.
Changes to benefits
There has been no increase in Child Tax Credit, Child Benefit, Jobseeker’s Allowance, Universal Credit and Employment Support Allowance, affecting around 10 million households.
We’re now into the third year of a four-year planned freeze and an average family with two children can expect £315 less in 2018 than they should have been entitled to.
New sugar tax
Since 6 April 2018, sugary drink manufacturers have had to pay the ‘Sugar Levy’. Drinks with more than 5% sugar are at a lower rate, while those with more than 8% are at a higher rate. It’s likely that prices will go up for consumers by around 8p per can.
For more information on how tax changes affect you and your business, contact the team at Turner Little.
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