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Financial Changes Coming This April

Annie 26th Mar 2024 One Comment

Reading Time: 7 minutes

April is the start of the new tax year and that means a bunch of financial changes ahead. As we roll into the 2024/2025 tax year, we’re going to take a look at every financial change that kicks in this month so you can make sure you’re taking care of your money as efficiently as possible!

Cash ISA Changes

Innovative Finance ISA Changes

Capital Gains Changes

Energy Prices

Changes to Take-Home Pay

Childcare Support Changes

Pension Changes

Changes to Dividend Allowance

Household Bill Increases

Cash ISA Changes

One of the biggest financial changes we’ll see in the new tax year impacts anyone who wants to make the most of tax-free ISA savings. While the maximum amount you can pay in to all of your ISAs each year stays at £20,000 (£9,000 for Junior ISAs), there are a few important changes to these brilliant tax-free savings accounts.

Cash ISAs can now only be opened for those aged 18 and over, which has always been the case for Stocks and Shares ISAs.

pile of money

One of the most significant changes is that you can now subscribe to (or rather, pay into) more than one of the same ISA type in each year. Previously, even if you held several Cash ISAs, for example, you had to choose one of them to pay into for that tax year. You can now pay into more than one of the same type. This is particularly handy if you’re trying to save different cash pots (such as one for a house deposit and one for a nest egg). The only ISA type you must only have one of is the Lifetime ISA.

Part of this change is that you also don’t need to ‘reapply’ for an existing ISA each tax year. In the past, if you had two Cash ISAs and paid into one (as the rules allowed), the other one would exist but need a ‘reapplication’ or renewal in new tax year. There’s no need to do this on your existing ISAs in the new tax year.

Finally, you can now internally transfer some of a Cash ISA into a new one. Up until now, if you opened a new Cash ISA and wanted to put money from a previous one in, you had to transfer the whole lot – but from April 6th, you can choose how much you want to transfer. Remember: it’s important that you transfer money between ISAs instead of withdrawing the amount, as doing that could prevent you from paying it back in thanks to the £20,000 limit. Transfers aren’t counted within that pay-in limit.

Innovative Finance ISA Changes

A less commonly known ISA, the Innovative Finance ISA allows you to invest in peer-to-peer lending opportunities and comes with a couple of reforms in the new tax year, too. First, Long-Term Asset Funds are now permitted investments in an IFISA, as long as they do not allow access to funds in 30 days or less.

Second, open-ended property funds are now allowed investments in an IFISA, if they have extended notice periods.

Capital Gains Changes

Two big financial changes lie ahead when it comes to Capital Gains tax.

First, the Capital Gains Allowance will be cut to £3,000 down from £6,000. This is a big blow to a lot of property owners who could have benefitted within the £6,000 limit – adding £300 on a CGT bill for a basic rate earner and £600 for higher rate earners.

However, the second change will be of interest to higher rate earners who own second properties. The previous CGT for a second property owned by a higher rate earner was a huge 28% – but from 6th April 2024, it’ll be 24%. For basic rate earners, this CGT remains at 18%.  (Standard capital gains tax on a primary property remain at 10% and 20% for basic and higher rate earners respectively).

Energy Prices

For the first time in what feels like an age, household energy bills are expected to drop. The Energy Price Cap drops by 12% from April, to £1690 (a reduction of £240). This is good news for those struggling with their bills – but keep an eye on your standing charges, as these don’t fall under the Energy Price Cap and may be set to rise, which could offset the average £20-a-month saving of the Price Cap.

Changes to Take-Home Pay

There will be two good-news financial changes to take-home pay from April 2024.

The National Minimum Wage will rise, benefitting low earners. For those over the age of 21, it will rise to £11.44 an hour, meaning an extra £1,856 a year for someone working 35 hours a week (meaning an annual salary of £20,820).

Something that will benefit even more people is the second National Insurance cut since 2024 began. If you earn between £12,750 and £50,270, your National Insurance contributions will drop to 8% (down from 10% in January and 12% in 2023). This will have a particularly noticeable impact for those earning above the median salary. For example, someone with an annual salary of £35,000 will be around £450 better off this tax year than the last.

National Insurance for self-employed people has changed, too. The rate for Class 4 National Insurance reduces to 6% (the same 2% decrease as for PAYE workers), and Class 2 National Insurance contributions will be completely abolished. To compare to the PAYE changes, this means a self-employed person on £35,000 a year will save about £850 compared to the previous tax year.

Childcare Support Changes

More people will be able to get Child Benefit this new tax year. If you earn between £50,000 and £80,000, you could be in for a pleasant surprise. The threshold is increasing from £50,000 to £60,000, so that means people who earn in that bracket will be due additional Child Benefit. For those earning £60,000 or above, you may now be eligible for Child Benefit when you previously weren’t, too. Remember this is based on household income, so it might be that both parents earning £50,000 will mean a household isn’t eligible, so make sure to check the details.

Another benefit that has changed is free childcare hours – but you must claim for them. Parents with a household income below £100,000 will get 15 free hours of childcare per term-time week for two-year-olds, instead of previously limiting to three-year-olds. However, those with children born in April 2022 or before must apply before March 31st to get the funding. If you’re reading this too late, don’t worry – you can apply again in September.

Pension Changes

Pension announcements are always one of the big financial changes we keep an eye on, as they often affect everybody in some way, even if you’re nowhere near pension age yet.

First: the Lifetime Allowance has been abolished. The previous maximum amount you could ever pay into your personal pension was a strangely specific £1,073,100. Now, two new allowances will replace the Lifetime Allowance.

The Lump Sum Allowance will mean you can only take a maximum of £268,275 tax-free from your pension, and then you’ll pay income tax when you take the rest. The second new allowance is the Lump Sum and Death Benefit Allowance, with a maximum of £1,073,100, which is the maximum tax-free amount you can pass on to your beneficiaries when you die.

The next big change is the State Pension 5% increase, boosting the annual income for a New State Pension recipient – someone who has been eligible to claim since April 2016 – who gets the full amount each week to £11,502.40 a year (£221.20 a week up from £203.85). Those on the ‘old’ State Pension (who claimed before April 2016) get a boost to £169.50 a week from £156.20.

Changes to Dividend Allowance

A blow to any company director or investor, the Dividend Allowance has been cut once again. This means that, from April, you can only receive £500 tax-free dividends, before paying dividend tax. This doesn’t include investments within a pension or ISA, though.

Household Bill Increases

The cost of living crisis continues as the biggest financial changes we’re going to see hit our pockets is the rise in household bills. This means that, even with changes such as the rise in National Minimum Wage and the cut to National Insurance, you might not see much benefit in real-terms as your household bills increase.

Council Tax rises will hit in April, with most increasing by the maximum 4.99%. This means a property in Band D could see their bill go up by £103 a year. If you’re on a low income, remember you might be able to get Council Tax Support so make sure you check your local authority website for more details.

Other bills are set to rise, too. You might have noticed that streamers are now offering ad-supported ‘cheaper’ subscriptions (that are still more expensive than last year’s cheapest option), while non-advert tiers rise even further. Disney+ is one example, which cost £79.99 in February 2023 but will now cost £129.99 for an annual subscription, while the TV License also rises from £159 a year to £169.50 a year.

For someone with Netflix, Disney, AppleTV, and Amazon Prime each month, the cheapest options will still mean a minimum outgoing of almost £30 a month.  One way around this is to rotate your streaming subscriptions on a monthly basis – choose one for each month and watch what you want, then cancel and pick up another service the next month. Keep an eye out for free trials, too – although these often are only available for new customers.

Your mobile phone company will have written to you recently, too – as they are permitted within your contract to raise the price each year in line with the RPI measure of inflation. As that is currently almost 9%, some providers (like O2 and Virgin Media) may increase some customer prices by that much for both phone and broadband contracts. This is a great time to get on the phone and haggle, though – even if you’re not quite at the end of your contract yet.

 

If you’re worried about how these financial changes will make the cost of living crisis harder for you, don’t panic. There are plenty of ways you can save money or make money on the side to top up your income – make sure you sign up to our weekly newsletter to get the latest money-savvy news!

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Cory
Cory
20 days ago

I literally did a big yard sale this weekend to put as much in my ISA as possible this year. Thank you for these sort of warnings as I really think they could help people stay organised. I also ordered a new passport as they will cost more soon.

Jasmine Birtles

Your money-making expert. Financial journalist, TV and radio personality.

Jasmine Birtles

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