No, we don’t mean the New Year as far as the calendar is concerned, we mean it’s the start of the new tax year.
This article will identify a number of changes that may affect your finances. Some of the areas you will see changes are in pensions and ISA’s of which a large percentage of the population have one of these or both so its worth discussing. There are a few things you can do to hopefully save yourself some money this year and with what’s going on with the world at the moment there is no better time to save a penny or two.
If you would like to speak to someone please contact us on 03333 232 199 and we will point you in the right direction.
The amount of personal income you can make before any tax is due is £12,500 and this has remained the same for 2020. However, what has changed is the age allowance where everybody now has the same personal allowance. For people earning over £100,000 your allowance will reduce significantly irrespective of your age. Basically, it reduces £1 for every £2 you earn over £100,000. Therefore, for everyone earning over £125,000 now personal allowance will be £0.
Like Income Tax the Dividend Tax allowance will remain the same for this year. After you have had your personal allowance the tax due will be as follows. For base rate tax payers the level is 7.5% and for higher rate 32.5%.
Capital Gains Tax
For this tax year there has been a slight rise in allowance for capital gains from £12,000 to £12,300. Once this has been exhausted lower rate tax payers will have to pay 10% on any profits over the £12,300 threshold with higher rate paying 20%. However, when we talk about investment properties the levels of tax increases with lower rate at 18% and higher 28%
The tax threshold for inheritance is £325,000 anything over that is taxable at a rate of 40%. However, to allow people to pass on their family homes to their loved ones a home allowance threshold is applied separately.
The majority of people are allowed to put £40,000 into their pension for the next year. The main difference this year for pensions is previously when people earned £110,000 the allowance of £40,000 started to reduce. However that has now been increased to £240,000 a significant change allowing a lot more people to place the full £40,000 into their pension pot.
Finally, we discuss ISA’s (Interest Free Saving Accounts). The amount people can place in an ISA tax free has remained the same at £20,000.
There is also the lifetime ISA which is something so many people use who are looking to buy a new home. The Lifetime ISA allows people to save £4,000 per year tax free.