With the coronavirus pandemic continuing to claim lives and wreak havoc on the economy, you probably won’t have noticed that the new tax year is here, starting on 6 April. There are a range of changes taking effect from this year – here’s what you need to know to help you stay on top of your finances.
Income tax and national insurance
The personal allowance for income tax has been frozen at £12,500 for this year, but the threshold for National Insurance will rise from £8,632 per year up to £9,500, meaning most taxpayers will be better off by around £100 this year. In Scotland, income tax bands are a devolved matter and differ from those in England, Wales and Northern Ireland.
Increases to minimum wage rates
While not strictly linked to the tax year, increases to minimum hourly wage rates in the UK take effect from 1 April each year. This year will see the following changes:
National Living Wage – increases from £8.21 to £8.72
21 to 24 rate – increases from £7.70 to £8.20
18 to 20 rate – increases from £6.15 to £6.45
Under 18 rate – increases from £4.35 to £4.55
Apprentice rate – increases from £3.90 to £4.15
In the Budget it was announced that the annual contribution limit for children’s JISA and CTF accounts would more than double, from £4,368 currently to £9,000 in 2020-21.
The annual contribution limit for ISAs remains at £20,000 per year for this tax year.
Changes to the State Pension
The new State Pension will increase by £6.60, while the basic State Pension will rise by £5.05, equating to £175.20 per week and £134.25 per week respectively.
Other changes that may affect your finances
Those paying off both Plan 1 and Plan 2 student loans will see the repayment threshold increase again this year, meaning they will have to earn more before they start paying off their loans.
Good news too for those claiming benefits as the government confirmed the end of the benefits freeze after four years – working age benefits are set to increase by 1.7% from this April. The roll-out of Universal Credit is set to continue in many parts of the UK.
However, 1 April saw increases to many unrelated bills and charges including council tax and the TV licence which may well offset or even reverse increases in disposable income as a result of this year’s changes.
And of course, coronavirus means that there is little or no certainty about the future of the economy and continues to hit many people’s pockets hard, despite the help already announced by the government.