09 April 2015

Posted by Discount Insurance on Thursday, April 09, 2015
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The new tax year started on Monday 6 April, meaning new rules, allowances and thresholds have been introduced. Find out what the key changes are and how you could be affected:  

ISA allowance shave increased

An ISA is a savings account which allows you to save up to a certain amount, without paying tax. The amount you can save tax-free has just increased to £15,240, up from £15,000 the previous tax year.

From 6 April, parents will be permitted to transfer funds from an existing Child Trust Fund to a Junior ISA. The allowance also increased to £4,080, up from £4,000. The ‘JISA’ will be in your child’s name until they reach 18.

The new tax year has also brought tax-free savings to low earners. If your combined yearly income and savings interest is below £15,600, under the new rules you won’t pay any tax on the interest paid on the savings.

Personal allowance and income tax changes

The amount you can earn before paying income tax has risen from £10,000 to £10,600.

If you’re born after 6 April 1938 your personal allowance is £10,600 if you earn less than £100,000 a year. If you earn between £100,000 and £121,200, it decreases by £1 for every £2 earned until it reaches £0. Over £121,200 and there is no personal allowance.

Born before 6 April 1938 your personal allowance is £10,600 if you earn under £27,700 a year.

Income tax bands have also changed. There are three bands, but only two have been changed.

·         If you’re earning between £10,600 and £42,385: You’ll pay 20% income tax (last tax year if you earned between £10,000 and £41,865 you would pay 20%).
·         If you’re earning between £42,386 and £150,000: You’ll pay 40% income tax (last tax year if you earned between £41,866 and £150,000 you would pay 40%). For those earning over £150,000, the income tax remains the same at 45% income tax.

Married couples and civil partners can now transfer up to £1,060 of their allowance to their spouse if they earn below £10,600 and if their spouse is a 20% taxpayer.  This could give a higher personal allowance of up to £11,660 and save money on tax.

This new tax break is called ‘Marriage Allowance’ not to be confused with ‘Married Couple’s Allowance’, which is only for those born before April 1935.

New exciting pensions rules

State pensions

The basic state pension has increased to £115.95 a week for a single person, up from £113 a week in the previous tax year.

The basic state pension has also increased for married couples who have built up the full number of qualifying years and stands at £231.90 a week.

Pension credit

For low income pensioner it’s possible to get a boost to your state pension by claiming pension credit. There are two types of pension credit that will top-up your pension.

·         Guarantee credit: This is available to all single pensioners with a weekly income below £151.20. The pension credit will top up your pension to £151.20 a week. If you’re married and the joint weekly income is below £230.85, it will be topped up to £230.85.
·         Savings credit: If you’re over the age of 65 and have saved for retirement you can get Savings credit. To qualify you must have a minimum income of £126.50 a week if you’re single and £230.85 if you’re a couple. It’s calculated for every £1 by which your income exceeds the minimum income you'd get 60p of savings credit. You’re entitled up to £14.82 per week is for a single person and £17.43 for couples.

Get your pension early

The biggest change here is, provided you’re over 55 and have a pension pot (defined contribution) you can take 25% as a tax-free lump sum. It’s also possible to withdraw the whole pot, but it will be taxed at normal rates rather than at the higher 55% it was previously.

Another pension rule has also changed. There will no longer be a 55% tax on your pension if you die before age 75, allowing it to be paid to a nominated beneficiary.

These above changes could mean a lot more people will save money than in the previous tax year.

Why not save on insurance too? At Discount Insurance we promise to offer a competitive home insurance quote without compromising on cover. Call 0800 294 4522 to find out how much you can save!