9 ways the new tax year affects you

The new tax year has seen the introduction of a number of measures designed to help those trying to build a financial future for their families.

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The start of a new tax year might not involve champagne and fireworks – but it can still be a time to celebrate.

From more tax-free, take home cash to new tax-efficient savings options, here are nine ways the 2016/2017 tax year could affect you.

1. Higher personal allowance

The personal allowance most people can earn before starting to pay tax has risen to £11,000 from £10,600.

Better still, it will rise to £11,500 from April 6 next year.

The amount you can earn before starting to pay higher rate tax has also gone up.
It is now £43,000, and will increase to £45,000 in 2017.

2. New personal savings allowance

If your aim is to save more this year, the good news is basic rate taxpayers can now earn up to £1,000 in savings interest tax-free each year – in any savings account, including current accounts.

For higher rate taxpayers, meanwhile, the allowance is £500 a year.

You can read more about this here.

3. More tax-efficient savings options

The amount you can save into an ISA this tax year has remained at £15,240. But the good news is if you use up your full allowance and then make a withdrawal, you can now top your cash ISA back up again in the same tax year.

What’s more, the government is keen to encourage people to save to buy homes and for retirement, and is creating new ISAs to do just that.

If you are currently renting, for example, you can take out a Help to Buy ISA, with which the government boosts your savings towards a first home by 25%.

And from April 2017, anyone under 40 will also be able to open a Lifetime ISA, into which the government will contribute towards a first home and/or retirement fund.

You can find out more about Lifetime ISAs here.

Savers keen to take advantage of peer-to-peer investment opportunities – when you earn interest for lending money out to people or businesses in need – can also now open Innovative Finance ISAs for the first time.

4. Higher marriage allowance

If you’re married, or are soon to get married, the marriage tax allowance is a way for couples to transfer a proportion of their tax-free personal allowances between them.

It is aimed at couples in which one partner is the main breadwinner and the other earns less than the personal allowance (now £11,000).

And as the personal allowance has gone up this year, it now enables you to transfer up to £1,100 into the lower earner’s name, saving you up to £220 a year.
You can apply for this tax break here.

5. Stamp duty changes

Stamp duty rates for first-time buyers and movers remain unchanged this tax year.

However, the government is cracking down on buy-to-let landlords by adding a 3% surcharge to purchases of investment properties and second homes worth £40,000 or more.

The hope is that this will help to control rising property prices – good news for those either struggling to get on to the housing ladder, or to move up it.

6. Freeze on petrol and alcohol taxes

Fuel duty is being frozen once again this tax year, as is the duty on beer, spirits and cider.

So whether you spend your free time ferrying your kids around or relaxing with a pint, you don’t have to worry about prices going up due to higher taxes.

Other alcohol duties will rise in line with inflation.

7. New dividend tax allowance

Investors receiving dividend income from shares held outside a tax-friendly wrapper can now take up to £5,000 a year tax-free.

For earnings higher than this, basic rate taxpayers pay a rate of 7.5%, higher rate taxpayers pay 32.5% and additional rate taxpayers pay 38.1%.

8. Lower Capital Gains Tax (CGT)

CGT – the proportion of profit you must pay to the government when you make money on investments – was previously set at 18% for basic rate taxpayers and 28% for higher rate taxpayers.

But from this month, the top rate has fallen to 20%, while the basic rate is now just 10%.

The aim of the change, which will not apply to landlords selling buy-to-let properties, is to encourage investment in UK businesses.

9. New State Pension

If you reach State Pension age on or after April 6 this year, you will receive the new State Pension.

At its full level, the new State Pension is worth £155.65 per week.

The amount you receive will depend on your National Insurance contributions, with only those with 35 qualifying years receiving the full amount. (Be aware if you have been 'contracted out' you may receive a lower amount.)

Each year adds £4.44 a week to the lowest amount, and those with less than 10 qualifying years get nothing at all.

Anyone already receiving a state pension under the old system, meanwhile, will see the basic state pension rise by 2.9%, pushing it up to £119.30 a week.

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