The 2015/2016 tax year starts on the 6th April 2015 and there’s some changes which will effect most of us.
The idea behind the government’s changes is to reward work and support people on lower and middle incomes.
Your 2015/2016 tax code
This is important for everyone and it’s good news for lower rate tax payers
- The personal allowance is going up – this means if you were born after 5th April 1948 you can earn £10,600 before you start paying tax. That’s £600 more than last year.
The standard tax code for the 2015/2016 tax year will look like this:
1060L
- For those who are 75 or over the personal allowance will be even higher at £10,660.
- The limit up to which you pay the Basic Rate of tax will be £31,785 which is down from £31865 last year.
Higher rate tax payers
The higher rate threshold, above which individuals pay income tax at 40%, will also increase from £41,865 to £42,285 for 2015/2016.
2015/2016 Income tax table
| £0 – £31,785▼ | 20% | Basic rate tax |
| £31,786▼ – £150,000 | 40% | Higher rate tax |
| over £150,000 | 45% | Additional rate tax |
What it all means…
Example
You have £35,000 of taxable income and your Personal Allowance is £10,500. You pay basic rate tax at 20% on £25,500 (£35,000 minus £10,500).
Savings
Your starting rate for income from savings will fall from 10% to 0%. This new rate is applicable to savings of up to £5,000. Banks and building societies will be able to pay your tax free interest into your account. This is positive giving savers a bit of extra tax relief.
Are you a non resident?
Well, the government is currently deciding if restrictions could be introduced to limit the personal allowance for Britons living abroad. They suggest that only those expats who “have strong economic connections to the UK” should receive the personal allowance and argue that most E.U. countries operate this kind of policy. They are currently at the consultation part of the process which evaluates the possible impact and the practicalities of implementing the proposals. Watch this space.
Do you have any kind of investments or a savings account?
On 1st July 2014 the government changed the annual subscription limits for some savings accounts. For Junior ISAs and Child Trust Funds, the amount increased from £3,840 to £4,000. For Stocks and Shares ISAs and cash ISAs the sum is standardised at £15,000. There has also been a relaxing of the rules around transferring funds between the Stocks and Shares ISAs and Cash ISAs.
The expected future changes will see a greater range of investments allowed into ISAs. For example, Building Society’s Core Capital Deferred Shares and other types of investments and securities.
Not everyone will benefit from the new tax code changes. As always it is best to know how it will effect you and to check your own position to make sure it’s right. Remember if your tax code is wrong you could easily pay too much tax.
If you want to know what the 2016/2017 tax code is you can use our 2016/2017 tax code guide.
