It’s a new tax year and with it comes change!
It’s easy to tune out to any news surrounding taxes. But, any change announced has the potential to have a major impact on your personal finances.
Fortunately, we’ve rounded up a list of recent announcements to help you stay up to date on what’s changed, what remains the same and how all of this impacts your household.
As with every year, there are several financial resolutions that will remain, and below we’ll start with a list that will not change from the previous financial year.
5 allowances that remain unchanged
1. Personal Savings Allowance
For those who manage to place a little aside for a rainy day, will know that they can save £1,000 without paying tax on it. This rate remains the same so now is still a great idea to put something away for life’s little emergencies.
2. ISA allowance
Each year, savers can save more than the personal saving allowance by using their annual ISA allowance. ISAs are where savers can save tax-free in the form of cash, stocks and shares or innovative finance ISAs.
You can read more about the various ISA options here.
The amount savers can save tax-free remains at £20,000 a year, which is disappointing yet savers should still make the most out of their allowance and start producing a little nest egg.
3. Child Benefit
Both the amount and the income threshold for claiming Child Benefit remains the same for 2019/20.
In the 2019/20 tax year, you can claim:
- £20.70 per week for the first born
- £13.70 a week for any additional children.
That’s more than £1,000 a year if you have one child and an extra £700 for second and further children. You can read more about other child support payments here.
Payments are tax-free provided neither parent earns more than £50,000 a tax year; otherwise, this will need to be repaid as part of a tax charge. This income threshold of £50,000 does not charge for 2019/20.
4. Tax relief on pensions
For those of us who can pay into a pension (and this is an excellent idea if you do) will know that the UK government will provide tax relief up to £40,000 a year. This amount remains the same as from last year yet despite pensions leaving your monthly pay packet, this is free money that is placed towards your retirement.
Saving for retirement may not seem the priority now; however with most of us expected to work longer lives, now is the time to begin saving.
5. NHS prescription charges
NHS Charges have been slowly increasing year on year, yet at the time of writing the good news is that there is no increase to prescription charges.
In 2019/20 the single charge for a medicine or dispensed appliance on a prescription will remain at £8.80. For those who use prescription payment certificates (PPC), the fees will be frozen at the following rates:
- £29.10 for a 3-month certificate
- £104 for an annual one.
So, with all that being said, what exactly has changed in this new tax year?
6 vital changes (and how they impact you)
1. Personal Allowance
Every worker has a Personal Allowance – the amount of money they can earn before Income Tax will be applied. The Personal Allowance is typically increased each year to cover the costs of inflation.
Scotland has a different tax system to the rest of the United Kingdom, however for England, Wales and Northern Ireland the amount people can earn will rise from £11,800 to £12,500, meaning that the additional £700 obtained by you will not be liable for any tax, and will be credited to you in your pay packet.
2. National Insurance threshold
National Insurance (NI) contributions are paid by workers (both employed and self-employed), so they can benefit from state benefits and qualify for a State Pension when they retire. The threshold for paying NI contributions will increase this tax year.
If workers earn less than £8,632 (up from £208 in 2018/19), they will pay no National Insurance contributions. If you make more than £8,632, you’ll now pay twelve per cent of your earnings between the threshold of £8,632 and £50,000 in 2019/20.
3. National Living Wage
For those earning minimum wage, there is great news in that the National Living Wage will increase from £7.83 to £8.21 per hour for those who are 25 years old or higher.
4. Junior ISA allowance
Putting funds aside for your children for when they grow up will be a great solution to set them up for adulthood. Now parents can save even more for their children as the allowance for the Junior ISA will rise from £4,260 from 2018/19 to £4,368.
You can read more about Junior ISAs and child savings here.
5. Council Tax
Ninety-seven per cent of councils are expected to increase Council Tax rates in April 2019, most by around 4.5% meaning an average Band D Council Tax bill, presently at £1,671 a year, would rise by £75.60.
6. Energy price cap
In January 2019 energy regulator Ofgem brought in a cap that limits the amount households have to pay on dual fuel bills. When implemented, this was excellent news for consumers; however, with rising energy costs the cap had to be increased to cover them. From 1st April 2019, the cap will increase by £117 to £1,254.
This cap is the maximum that energy companies can apply to remember to shop around for cheaper deals. You can read more on how to save on your household energy bills here.
So, here are the changes that you should know for this tax year.
Of course, there’s always going to be changes. The good news here is that several allowances remain unchanged!
One way or another, you or your household will be impacted by these changes, so make sure to familiarise yourself with what’s new, so you can maximise your savings and reduce your bills for the coming financial tax year.
How do you plan to take advantage of these tax changes?