As Chancellor Alistair Darling revealed in his December Pre-Budget Report, there will be some slight changes to tax allowances for the year 2010/11. We've put together
some tables showing the new allowances.
So what else will be different? Here's a rundown of the main changes:
Income tax
From April, high earners will be hit with a new 50% tax bracket. Currently, you pay 20% basic tax on income of up to £37,400, after that you pay 40%.
However, the new tax rate of 50% will be levied against any income of more than £150,000.
If you're a high earner, you may also see a reduction in your personal allowance, which will drop by £1 for every £2 you earn above £100,000.
That's a double whammy for the wealthy, who will in effect pay 60% tax on income between £100,000 and £112,950 - because they've lost their personal allowance tax break and will have to pay basic level tax on everything they earn up to £37,400.
Personal allowance
Even those who still benefit from a personal allowance will effectively be less well off, because personal allowances are not going up in line with inflation. Instead they will be frozen at 2009-2010 levels. The tax-free allowance for the under-65s will remain at £6,475; £9,490 for those between 65 and 74; and £9,640 for anyone who is 75 or over.
Some people will be worse off because they will be pushed in to a higher tax bracket because their salary has gone up but the personal allowance hasn't. This is known as fiscal drag and the Institute of Fiscal Studies estimates an additional one million workers will be pushed in to the 40% tax bracket from April 6. You start to pay higher-rate tax on earnings above £43,875 a year (you pay 20% on earnings up to £37,400 and also benefit from your tax allowance of £6,475).
ISAs
People will be able to save more money in a tax-free wrapper. The amount you'll be able to save into ISAs each year will rise from £7,200 to £10,200, and you can save up to £5,100 into a cash account.
These rule changes came into play for the over-50s back in October but will now be rolled out for everyone.
Inheritance tax
The inheritance tax thresholds are going to remain the same for 2010/11 as they were last year, which means the allowance of £325,000 per person hasn't been changed in line with inflation.
Effectively, that means more people will be caught by the tax than before, netting the Treasury more money.
Pensions
The minimum age at which people can start drawing their occupational or personal pension is going to rise on 6 April, from 50 to 55. That means if you were born between 7 April 1955 and 6 April 1960, you may now lose the ability to start drawing your pension until you reach 55.
You can read more about this in our article 'Pension changes: What do they mean for you?'
The gradual phasing in of later retirement ages will also begin, as ten years of gradual hikes start. You can visit the government's state pension age calculator to work out when you'll be able to claim.
Child Trust Funds
There's some good news for children with disabilities. From April 6, children with disabilities will receive a £100 state contribution each year to their child trust funds, while severely disabled youngsters will gain a £200 annual boost.
Currently all children receive £250 at birth, with kids from low-income homes and looked-after children being given £500. This is repeated when they're seven but parents can also pay in up to £1,200 each year.
Tax fraud
From April, strict new measures will be rolled out to clamp down on tax evasion and avoidance. In fact, HM Revenue & Customs says it will even name and shame deliberate tax defaulters.
'Showroom tax'
Back in 2008, the government announced taxes for higher-polluting cars - and these finally kick in come the new tax year.
The so-called 'showroom tax' actually sneaks in ahead of the new tax year, on 1 April and could add hundreds of pounds to your first year's vehicle excise duty rate. The amount you pay depends on the vehicle's green credentials, so there is no additional charge for Band A to G vehicles.
However, cars in bands H to M will pay between £70 and £515 on top of their usual rates.
In fact, the heaviest polluting cars will pay an extra £515 in their car's first year, making the total tax cost £950.
Fuel duty
Fuel duty was meant to rise by 3p in April but Darling has now staggered the increase. In April, the cost of a litre will rise by 1p, by 1p again in September and by a further 1p in January. After that. fuel duty will continue to rise by 1p a litre every April until 2013.
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