Traditionally, the beginning of a new tax year brings changes to taxes, benefits and the cost of some essentials – and despite the extraordinary conditions we are currently living in, this year is no different.
From 6 April we will see changes to junior Isas, national insurance and inheritance tax (IHT), among many adjustments that will affect the pounds in your pocket. There were also a number of price changes that came into effect on Wednesday 1 April, dubbed by some as “national price hike day”.
Here’s what is changing:
National living wage – up 6.2%
The national living wage for workers aged 25 and over increased by 6.2% to £8.72 an hour from 1 April. Workers aged 21 to 24 saw their hourly rate increase from £7.70 to £8.20, while those aged 18 to 20 saw a rise of 30p to £6.45 an hour.
For people aged 18 and under, their hourly rate went up by 20p to £4.55. The minimum wage for apprentices also increased, from £3.90 to £4.15.
New two-week parental bereavement leave
From 6 April, parents who suffer the loss of a child under the age of 18, or suffer a stillbirth from 24 weeks of pregnancy, will be entitled to two weeks’ statutory paid leave. The new entitlement is known as Jack’s Law, in memory of 23-month-old Jack Herd, who drowned in a pond in 2010.
National Insurance – save £104
The threshold for national insurance contributions is increasing from £8,632 to £9,500 from 6 April.
The new threshold means the average full-time worker will see their tax bill cut by £104 a year, and the typical self-employed worker by £78.
Prescriptions – up by 15p
Starting on 1 April, the price of a prescription went up by 15p, from £9 to £9.15, in line with inflation.
The cost of a prepayment certificate (PPC) – which lets you get as many NHS prescriptions as you need for a set price – also increased. A three-month PPC increased by 55p to £29.65 and a 12-month PPC went from £104 to £105.90.
TV licence – up £3
The price of watching the BBC through buying a TV licence went up on 1 April from £154.50 to £157.50, a £3 increase, or 2%.
Council tax – up 3.9%
The average council tax for a band D property will be £1,817, up 3.9%.
Junior Isas – allowance doubled
There was good news for parents in the budget – the maximum amount they can save in a junior Isa for their child is increasing from £4,368 to £9,000 a year from 6 April. As with all types of Isa, there is no tax to pay on interest or capital gains on growth.
State pension – up 3.9%
The state pension will go up by 3.9% in April, the biggest rise since 2012. This means those receiving the new state pension (who reached pension age after 6 April 2016) will see an increase of £6.60 a week to £175.20.
Those claiming the old state pension will see their basic payment increase by £5.05 a week to £134.25.
Pension savings – good news for doctors
High earners can save even more in their pensions from 6 April as the lifetime allowance (the maximum you can save into a pension before high tax charges apply) will rise from £1,055,000 to £1,073,000.
There is also good news for high earners hit by the pensions “taper tax” that resulted in top NHS doctors receiving large tax bills.
The standard tax-free annual allowance on pension contributions is £40,000 but this starts to taper down to £10,000 for those earning more than £110,000. This allowance goes up to £200,000 from 6 April but the minimum floor will fall from £10,000 to £4,000.
Student loan repayment threshold – up £850
Graduates will get a small boost in their take-home pay from April as the amount they can earn before starting to repay their student loan will increase from £25,725 to £26,575.
Those who earn over this limit repay the loan at a rate of 9% above this figure, so the increase will mean graduates earning above the threshold will keep an extra £76.50 of their pay.
Inheritance tax – homes up to £1m can avoid tax
The nil-rate IHT band for anyone passing the family home to their direct descendants increases to £500,000 from 6 April.
The family home allowance has increased each year since its introduction in 2017. In the 2020-21 tax year the final increase will be up to £175,000. Combined with the standard threshold of £325,000, it means many families will not pay IHT on estates worth less than £500,000, while couples will be able to leave estates worth up to £1m before IHT kicks in.
Buy-to-let
Mortgage tax relief for buy-to-let landlords has been gradually phased out since 2017. The new tax year marks the final phase of its removal – this will affect higher and additional rate tax payers.
Landlords can no longer deduct mortgage expenses from their rental income to reduce the tax they pay. Instead, they will receive a tax-credit, based on 20% of their mortgage interest payments. Landlords selling up will also be affected by new capital gains tax (CGT) rules, which come into effect in April.
