Tax changes can have major implications for everyone, from self-employed professionals to single parents or business owners.
We have outlined the important changes and what they mean for your financial planning for the year ahead.
Digital tax returns
The introduction of digital tax accounts is one of the biggest financial changes of 2016. Within four years it is expected that everyone who completes a self-assessment will be expected to complete it online.
The new digital accounts will eventually be used for all tax payers, with some taxpayers being expected to update their details every quarter.
The digital tax accounts will hold information about employment, and any interest earned from savings. HMRC will also be able to pass this information on to banks and building societies.
Reduced incentives for “green” households
Due to cuts, the Department of Energy and Climate Change have decided to reduce payments made to a proportion of those who own homes with rooftop solar panels, wind generators or hydro generators.
Anyone who made these changes to their home before January 15th will be unaffected by the change but everyone else will have their incentives slashed. Solar panels will now earn 4.39p per electrical unit, which is quite a reduction from the former payment of 13.39p.
New personal savings allowance
Good news for anyone with some money put aside. The new rules mean that we are allowed to earn £1000 in interest before paying any tax on our savings.
It is estimated that this change will mean that 95% of people will no longer need to pay tax on their savings. For higher-rate tax payers the amount of interest is capped to £500.
The basic state pension rose from £115.95 per week to £119.30. A new state pension was also introduced for anyone reaching retirement age on or after April 6th.
This new single-tier pension could mean a weekly payment of £155.65 for some pensioners but not everyone will be eligible.
Towards the end of the new tax year, tax relief will be available to working parents to help pay for childcare. This will replace the existing system of childcare vouchers and will allow working parents up to £2000 per month in tax relief to help with childcare costs.
Bad news for landlords and second home owners as stamp-duty went up by 3% on the 1st of April.
Tax credit income disregard halved
Previously, people on tax credits were allowed to earn £5000 more than expected before they had to repay tax credits the following year. This figure has been cut in half. This tax year, a household’s income can only increase by £2500 before their following year’s tax credits are affected.
Maintenance grants for students have now been replaced with maintenance loans. The loan will entitle students to £8200 per year (£766 more than the grant) but they will need to start repaying the money as soon as they earn over £21,000 a year.
New national living wage
The new national living wage of £7.20 for employees aged 25 or over came into effect on April 1st.
The new budget can affect us all, so it is worth learning about all of the changes and how they may affect you so that you can enjoy financial security this tax year.
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