The new financial year is here, and for many families and individuals, it means a change in the amount of money that is going in and out of their accounts.
Depending on people’s individual circumstances, savings, pensions, ISAs and a raft of other financial products and services could be affected, as a result of measures announced by the government in the Budget and last year’s Autumn Statement.
As such, the Money Advice Service has created a reference guide that breaks down some of the key changes and how they are likely to affect you.
Savings now earn tax-free interest
As part of the new Personal Savings Allowance (PSA), everyone paid less than £43,000 a year will see a significant boost to their savings. Rather than the bank deducting 20 per cent tax from any interest earned, account holders will now receive it all straight into their account. Up to £1,000 each financial year can be made with this tax-free allowance, although that reduces to £500 for those who are higher rate tax payers earning more than £43,000. Any interest earned over the PSA is taxed at the normal rate, although those who earn more than £150,000 a year will not get the PSA.
You will keep more of your salary
The amount a person can earn before they begin to pay income tax will rise from £10,600 to £11,000, which will give everyone an extra £80 a month. If people earn £43,000 or more, they will also take home more money, as the higher tax rate threshold has increased by £415, cutting tax payments by an extra £83.
Increased flexibility for ISAs
Most ISAs will now have greater flexibility, with people able to withdraw money from an ISA and pay the same amount back in as long as the total balance at the end of the year is not more than £15,240. This could vary depending on the ISA provider, however, so it is best to check with them.
A new type of ISA has been launched
In addition to the Help to Buy ISA that launched last autumn, there is also a new Innovative Finance ISA for those looking to invest in peer-to-peer lending. It is worth noting that the Lifetime ISA that was announced in the March 2016 Budget will not be available until 2017.
Hourly income boost through the Living Wage
If people are aged 25 or over and are currently earning the minimum wage, this has now been replaced by the Living Wage, which is set at £7.20 an hour and is intended to more closely reflect the cost of living in the UK. The Living Wage rate will change every April, although the minimum wage will still apply for those aged under 25. However, this has also increased for many people.
Buying a second home
For home buyers who already own a property and are looking to increase their portfolio, they will have to pay additional Stamp Duty on any future property. An additional three per cent will apply to the charges.
The new State Pension is here
As of April 6, major changes to how the State Pension is calculated have been introduced, which will make a big difference to men who were born after April 6 1951 and women born after April 6 1953.
The Money Advice Service offers free and impartial advice to help people manage their money. Resources and other information are available at www.moneyadviceservice.org.uk/.