A Prosperous New Tax Year?
April 6th, marks the beginning of the 2018/19 tax year.
Some of us will be better off, while others might be a little less fortunate, in the short term at least. We look at some of the winners and losers.
Almost all taxpayers will have a little extra cash – in England, Wales and Northern Ireland, at least. The tax threshold rises from £11,500 to £11,850, giving basic-rate taxpayers an extra £70 a year.
The 40% higher rate tax threshold will rise from £45,000 to £46,350.
However, although we should all welcome any generosity from the Chancellor, income tax thresholds are really only keeping pace with inflation.
Those north of the border face bigger changes. Scottish taxpayers now have different rates from those in the rest of the UK, with four tax bands. An income between £11,850 and £13,850 will mean a 19% starter rate, those earning £13,850 to £24,000 a basic 20%, and £24,000 and £46,350 an intermediate rate of 21%. Above £46,350 tax falls back into line with the rest of the UK.
Those who earn under £33,000, around 55% of all Scottish taxpayers, will pay less overall.
Those in low paid jobs should be better off. The National Minimum Wage, for those under 25, and the National Living Wage (for those 25 +) are rising by more than inflation. The most generous increase is for 18 to 20-year-olds, whose salaries will rise by 5.3%, or 30p per hour. Those over 25 will see an increase of 4.4%, or 33p an hour from £7.50 to £7.83.
Student loans – a higher threshold
Former students will be able to earn more before they start paying back their loans. Those who took out loans before September 2012 can now earn £18,330 (up from £17,775) before having to repay.
English and Welsh students who took out loans after 2012 loans do even better. They can now earn £25,000 instead of £21,000 before starting to repay. This means someone earning £27,000 will save £530 a year, although the amount owing will carry on going up.
In England, council tax is up by an average of 5.1%. The average band D property will pay £1,671 – a rise of £81 on last year. All Scottish councils are increasing council tax by 3%, while Wales will face the largest rises, with the biggest hike in Pembrokeshire, of 12.5%.
Workers with auto-enrolment pensions will have to pay more into their pension pots. Minimum contributions will triple, from 1% to 3%, but the increase of several hundred pounds a year more comes with a silver lining. They will get a 2% contribution from their employer, more tax relief – and eventually a pension that looks much more generous.
The Pensions Lifetime Allowance, the maximum you can save into your pension pot is also going up from £1 million to £1,030,000.
What should you do?
Winner or loser, with inflation still high, many of us will need to keep a close eye on our money management, and ensure we are using our allowances to the full.
Of course, there are some positives we can all enjoy with a new tax year, not least a new set of tax allowances, making it the ideal time for a fresh look at ISA investment.
Source: Continuum | 06-04-2018