We are all familiar with the Budget process and the many changes that are announced but this week, the first of the new tax year is actually when many of them come into force. As accountants we are heavily focused on the end of tax year / beginning of new tax year cycle but realise for others it is a less important date. To help you, we’ve summarised below many of the changes that will affecting you from this week onwards.
Income Tax
From 5th April each year the new income tax allowances are applied to your earnings. This means you can now earn £11,850 before you pay any tax; up to £46,350 before you go from 20% tax up to 40% and the top rate threshold of 45% remains the same at £150,000 per annum. This is slightly different in Scotland but as our clients are in the Greater Manchester area we wont cover that here. If you need to know the income tax allowances for Scotland you can see them here.
Minimum Wage
For those earning either the National Minimum Wage or the National Living Wage, these pay rates are also updated.
Apprentice Rate is now £3.70 / hour
Under 18 is now £4.20 / hour
18-20 is now £5.90 / hour
21-24 is now £7.38 / hour
25+ is now £7.83 / hour
Student Loans
If you have a student loan to pay back then you can now earn more money before you have to start paying it back. For those who took out a loan before 2012 you can now earn £18,330 before you have to start repayments. For those whose loan is post 2012 the rate increases much more and is now £25,000.
Pensions
This is an area where many people are going to see a significant change as those who have started auto enrolment pensions will see their minimum contribution increase from 1% to 3%. So although the money is still “yours” it is being redirected to your pension pot rather than your wages so you wont see the benefit until you retire. In the long term this is a good thing but in the next few weeks as people adjust they may feel the pinch.
For the non-business related taxes there are also some changes you may want to take note of. For example with Inheritance Tax the basic value of any estate you can pass on remains at £325,000 but the additional exemption for property rises to £125,000.
Council tax is also rising sharply with an overall average increase of 5.1% across the country.
Tax and Payroll Advice
This is one of the most important dates in the calendar for businesses. So if you need advice on handling payroll or planning tax matters for yourself as the owner of a business why not give us a call for an initial discussion? We will be running a drop-in tax return advice service over the next few weeks and would be happy to sit with you to discuss your tax plans.
