The new tax year has begun, and necessary changes have been made by HMRC and the Government that will affect most people throughout the UK. These changes could see individuals gaining more in their monthly wages, but may also result in having to pay higher tax contributions.
We’ve complied the brief snapshot below to help you understand and navigate the new changes.
The income tax threshold is increasing from £12,500 to £12,570, while the higher rate threshold will rise from £50,000 to £50,270. This means that workers will be able to earn a slightly higher amount before income tax needs to be paid on their earnings.
In addition to income tax rising, the National Living Wage will also rise by 2.2% to £8.91 an hour, and the age in which workers can earn this is lowered from 25 to 23. Those aged 21-22 will see their minimum wage raise 2%, from £8.20 to £8.36. For those aged 18-20 it will increase by 1.7% from £6.45 to £6.56, while for those under the age of 18 it will increase by 1.5% from £4.55 to £4.62. In addition to this the apprentice rate increases by 3.6% from £4.15 to £4.30.
The increase in the income tax threshold means that the personal savings allowance threshold will also increase. This means that those who earn up £12,570 can earn up to £5,000 in interest on savings without paying tax. Savers will not enter the higher rate taxpayer threshold until they earn a minimum of £50,271.
ISA savers will see their tax-free ISA allowance re-set. The allowance for the new tax year will remain at £20,000.
Retirees receiving the full state pension will see their pension rise by 2.5% resulting in them receiving £179.60 per week.
New off-payroll rules entitled IR35 will now affect both the public and the private sector this change in IR35 legislation will only effect you if you also get paid to your limited company/PSC for another role
IR35 will affect individuals supplying their services through an intermediary, such as a limited company/personal service company (PSC). The responsibility for determining if a person’s role falls inside or outside of IR35 now falls on the end client.
You can find more information about IR35 reform within our article pages.
If you have questions about how these changes may affect you as our employee or customer please do not hesitate to contact us.