New Tax Year
Wednesday this week, 6 April, saw the start of the new tax year when a range of new tax, pensions and savings reforms came into force.
First, there was an income tax cut for over 30 million workers with a further increase in the personal allowance from £10,600 to £11,000.
A basic rate tax payer will have £905 more in their pocket than they had in 2010.
Over recent years more and more middle income earners have been dragged into the higher rate of tax. So the Higher Rate Threshold will also increase, from £42,385 to £43,000.
Combined with changes to the personal allowance, this will mean that a typical higher rate taxpayer will pay £818 less this year than they did in 2010. Last month’s Budget announced a further increase next year to £11,500 and £45,000.
The second change is that 17 million savers will be taken out of savings tax with a new Personal Savings Allowance. The first £1,000 of interest a basic rate taxpayers earns on their savings will be completely tax free.
The third change is the introduction of the new flat rate state pension. The aim to deliver dignity and certainty in retirement for millions of new pensioners.
Those reaching pensionable age will receive a new ‘single-tier’ pension with a starting rate of £155.65. This will be simpler and fairer, with all employees - whether in the public or private sector - paying the same rate of National Insurance Contributions.
These changes build on the introduction last week of the National Living Wage and cuts to small business taxation. In addition, many families will also benefit from an increase in the Marriage Tax Allowance, allowing an individual to transfer up to £1,100 of their personal allowance to their spouse, cutting their tax bill by £220.
And this is the sixth successive year in which the Government has frozen fuel duty. This means the average car driver is paying £450 less on fuel compared to what they were paying in 2011, of which £80 relates to fuel duty.
These tax reductions have been made possible because public spending is under control, the budget deficit is being reduced, and the economy has returned to growth.
They are the fruits of hard-won economic success. We must not put this at risk.