Happy New Year! Yes, I know it’s spring, but now we are in a New Tax Year a raft of changes have come into effect that could see more money back in your pocket.
Here are the major ones you need to know about.
Your savings will now earn tax-free interest
The new Personal Savings Allowance (PSA) gives everyone paid less than £43,000 a year a huge boost to their savings. Rather than the bank deducting 20% tax from any interest earned, you’ll now receive it all straight into your account.
You can make £1,000 each financial year with this tax-free allowance, though that reduces to £500 if you are a higher rate tax payer (i.e. get paid more than £43,000). Any interest earned over the PSA is taxed at your normal rate. Anyone who earns more than £150,000 a year won’t get the PSA.
You’ll keep more of your salary
The amount you can earn before you begin to pay Income Tax has risen from £10,600 to £11,000, giving you an extra £80 per month.
If you earn £43,000 or more, you’ll also take home more money. The Higher Tax rate threshold has jumped by £415, cutting tax payments by an extra £83 per month.
You’ll get more spare cash for renting your spare room
Every year you can now earn £7,500 from renting out your spare room. This is up from £4,250, but it’s per property rather than per person.
ISA money won’t be locked away once you invest it
Most ISAs will now have greater flexibility. Rule changes mean you can now withdraw money from your ISA and pay the same amount back in as long as the total balance at the end of the year is not more than £15,240. Do check that your ISA allows this though.
There’s another type of ISA
As well as the Help to Buy ISA that launched last autumn, there’s going to be an Innovative Finance ISA for people looking to invest in Peer-to-Peer lending. The Lifetime ISA announced in the Budget won’t be available until 2017.
New Living Wage boosts hourly income
If you’re 25 and over the minimum wage has been replaced by the Living Wage, set at £7.20 an hour. The Living Wage rate changes every April. The minimum wage still applies for under 25s, but that has gone up too
It’ll be more expensive to buy a second home
If you already own a property, you’ll have to pay additional Stamp Duty on any further homes you buy. An extra 3% will apply to the charges.
The new State Pension replaces the old system
It’s all change for how State Pensions are calculated – and this could make a big difference to men born after 6 April 1951 and women born after 6 April 1953.
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