What’s already happened?
At the start of the new tax year on April 6, 2015, the income tax personal allowance rose from £10,000 to £10,600. In other words, you now won’t pay income tax on earnings below £10,600.
Further increases to the personal allowance are scheduled in April 2016 and April 2017. For a full breakdown of personal allowances, click here.
The new tax year also brought good news for savers as the 10% starting rate for savings interest was scrapped.
Originally announced in the 2014 Budget, the government has also increased the amount of savings income the new 0% rate applies to from £2,880 to £5,000. This means that if your total income is less than £15,500 you won’t pay any tax on your savings. You can find out more about this here.
Up to five million pensioners who currently receive a guaranteed income for life from an annuity have also benefited from the Budget. That’s because they can now sell their right to that income in return for a lump sum without paying a hefty tax charge of 55% (instead, tax will be levied at your personal rate).
What’s still to come?
So that’s what’s already happened this year. Here’s a quick run-through of what to expect over the coming months:
In the autumn
This autumn should see the launch of the Help to Buy ISA which aims to help first-time buyers save up a deposit for their first home.
Up to £200 a month can be saved into the Help to Buy ISA, with the government topping up contributions by another 25% - this means that for every £200 you save, the government will pay a further £50.
The most you’ll be able to save into your ISA is £2,400 a year, although in the first year you can start your ISA with an initial £1,000, onto which the government will add £250.
From April 6 next year, basic rate taxpayers will be able to earn the first £1,000 of savings interest tax-free...
Remember that as this is an ISA you won’t pay tax on the interest you earn.
ISAs in general are also set to become more flexible this autumn, as savers will be able to withdraw cash and deposit it again without losing its tax-free status (as happens now) – this is so long as the balance doesn’t exceed the annual limit.
With a flexible ISA, you will also be able to invest in certain bonds and other financial vehicles.
From October, the national minimum wage will increase by 20p an hour to £6.70. Class 2 National Insurance (NI) contributions for the self-employed are also due to be scrapped, though it isn’t yet clear when.
Annual tax returns are set to be abolished and replaced with new digital tax accounts from next year. It’s hoped that all taxpayers will be able to use the new system by 2020.
The pension lifetime allowance will also fall from £1.25 million to £1 million next April. This is the amount that can be paid out from your accumulated pension investments without triggering an additional tax charge.
And, perhaps the biggest news of all, from April 6 next year, basic rate taxpayers will be able to earn the first £1,000 of savings interest tax-free, rather than paying 20% tax.
Higher-rate taxpayers will be able to earn the first £500 tax-free, rather than paying 40% tax.
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