Although it seems like an age ago, the new financial year began on 6th April and many previously announced Budget changes started. And there are a lot of them.
Some apply to individuals, some to businesses. We’re highlighting the ones we think will affect most of our clients. Reading through the small print, so you don’t have to.
With the many financial issues being caused by the Coronavirus it’s a good time to review what changes may be coming your way both good and bad. Keeping up to speed can help you plan your own financial goals and budgets.
Not everything applies equally to everyone. Skim through the subheadings to read about the specifics that are important to you.
National Insurance Contributions threshold increase
The amount you need to earn before you start paying National Insurance Contributions (NICs) is going up to £9,500. It was £8,632.
This means that an average self employed worker will save £78 per year in NICs, and an average employee will save £104.
Income tax rebates
The way in which you can claim an income tax rebate through PAYE is not changing. The way in which you claim all depends on the type of tax rebate you are claiming for. If you need to make a claim for a tax rebate you should begin the process as soon as you can so you don’t miss the four year deadline.
Council Tax is increasing
Your council tax bill is going up by 3.9%. This amounts to an annual bill of £1,817, for an average Band D home.
National living wage is going up
The National Living Wage (NLW) is increasing. This affects you if you’re an employee and an employer.
The NLW is going up by by different amounts, to different hourly rates for each category of worker, by age:
- Apprentices: Up to £4.15, from £3.90
- Under 18s: Up to £4.55, increase of 20p
- 18-20s: UP to £6.45, increase of 30p
- 21-24s: Up to £8.20, from £7.70
- 25+s: Up to £8.72, a 6.2% increase
TV licence fee
The price of your TV licence is going up by £3, to £157.30 per year. This is a 2% rise.
Prescription charges
The charge for an individual prescription is going up by 15p to £9.15.
There are also increases to the cost of a Prepayment Certificate (PPC). This scheme lets you pay a set price, for a defined amount of time and this pays for unlimited NHS prescriptions within that time.
A 3 month PPC will now cost £29.65, an extra 55p. And the 12 month PPC cost will now be £105.90, up by £1.90.
State Pension
Your State Pension is getting a 3.9% rise, the largest since 2012. If you become a pensioner after 6/4/16, you will get an extra £6.60 in your weekly pension – taking it to £175.20. Before this date, you now receive an additional £5.05 per week, a total of £134.25.
Private Pensions and the Taper Tax
The Annual Allowance for pension contributions was £40,000. This is the standard amount you can save into a pension tax free. It was the case that this £40,000 allowance gradually ‘tapered’ down to £10,000 once your earnings are over £110,000 per year.
What is changing? The parameters of this standard pension annual allowance are now a £200,000 ceiling and £4,000 floor.
The tax relief for higher rate tax payers paying into a private pension scheme is not changing. In addition the rules surrounding pension tax relief for UK non residents have not changed.
Private Pensions and your Lifetime Allowance
The government has raised the amount you can save into private pensions from £1,055,000 to £1,073,000. This is called the Lifetime Allowance and any pension savings exceeding that amount become subject to high tax charges. This is a great tax saving for the small proportion of taxpayers that this change affects.
New Statutory Bereavement Leave
Jack’s Law, as it’s known, states that parents are allowed two weeks paid leave if they lose a child. In this case, ‘child’ means someone that is under 18 years old, or stillborn during or after the 24th week of pregnancy.
Lucy Herd campaigned for this employment right after losing her son, Jack, in a tragic accident when he was almost two years old. The law is named in his memory.
It is a ‘day one’ employment right, which means it doesn’t matter how long you’ve been employed by the company. The two weeks can be taken consecutively or separately during the first year after the bereavement.
Inheritance Tax nil rate band extended
Inheritance tax is a slightly tricky one to navigate. Let’s get some details straight before we highlight the changes in the Budget.
Inheritance Tax is a tax that you have to pay on an ‘estate’ that you have been left by someone when they die. ‘Estate’ means money, other items belonging to the deceased and their property. The calculation to work out the amount of IHT you need to pay involves many factors, including the thresholds determined by IHT regulations.
- You don’t pay any IHT on an estate that is worth up to £325,000
- After that, everything is taxed at 40% unless you leave it to your civil partner, wife, husband, charity or community amateur sports club.
Residence nil rate band
There is also the Residence Nil Rate Band (RNRB). This means that you can inherit a ‘main residence’ (family home) from your parents or grandparents now worth up to £175,000, tax free. When you add the basic allowance of £325,000 and the new RNRB allowance of £175,000 together, you get £500,000 of tax free inheritance. This doubles if couples are bequeathing jointly to their children or grandchildren.
Buy to let landlords
Buy to let landlords no longer receive any mortgage tax relief. Mortgage expenses could previously be deducted from rental income, therefore reducing landlords’ total taxable income amount.
This has been phased out in stages and the final phase of zero mortgage tax relief begins in this tax year. Higher Rate and Additional Rate taxpayers will be most impacted by this change.
The new replacement tax credit allows for 20% of mortgage interest payments. New Capital Gains Tax regulations will also affect landlords who want to sell their properties.
UK Non resident landlords who have property income from the UK are not exempt from the mortgage interest tax relief reduction.
Junior ISA maximum substantially extended
Junior ISAs have no tax to pay on the interest earned, or capital gains on their growth. The maximum amount you could put away in a Junior ISA was £4,368. In this Budget, this has been massively increased to £9,000. That means you can put £9,000 into a Junior ISA account for your child without paying any tax on it.
Student Loan Repayments
The amount you have to earn before you have to start repaying your student loan has gone up to £26,575. This threshold was set at £25,725. This means that graduates earning over this threshold will save £76.50. Repayment rate for taxpayers earning over the threshold is 9%. Please see our free student income tax guide for some more helpful tips and information on UK tax and being a student.
