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Financial changes for the 2023/24 tax year.
The new tax year is upon us, with many financial changes taking place from the beginning of this month. After the confusion and uproar post mini-budget last year – known to many as ‘Trussonomics’, the Spring Statement from new chancellor Jeremy Hunt was eagerly awaited.
With many changes discussed in his statement, it may be difficult to remember what was spoken about, and how it may impact you and your money.
Here are some of the key changes in the 2023/24 tax year.
The chancellor froze income thresholds for the amount basic and higher-rate earners are taxed. The 20% basic rate applied on earnings between £12,572 and £50,270. The higher tax rate of 40% kicks in at earnings of £50,271 and over.
This will mean millions are going to pay more tax, as some salaries increase to balance the ever-increasing cost of living. These increased earnings mean many will be placed into a higher tax band.
However, the threshold for those on additional rate taxes has decreased from £150,000 to £125,140 from 6th April. This means those earning over this amount will start paying a 45% rate of tax on more of their earnings.
Someone who earns £150,000 per year who may have previously avoided this tax rate, will now pay almost £1,250 more a year in tax.
When it comes to your retirement, your pension will be the first thing on your mind. From 6th April, the amount you can save into your private pension pot in any one tax year and still get tax relief from the government has increased.
Previously, the cap stood at £40,000 per tax year. This has been increased to £60,000, meaning you can put more into a private pension without having to worry about extra tax on your retirement savings.
From the 10th April, the state pension also increased in line with inflation. The increase of 10.1% means the full state pension will increase to £203.85 per week, or £10,600.20 per annum. If you reached the state pension age before 2016, the state pension amount will be £156 a week, or £8,100 for the year.
Additionally, pension credit also increased by 10.1%. Couples will now receive £306.85. Individual claimant will get an £18.44 increase, from £182.60 to £201.04.
Another change to pensions applies to anyone who has already withdrawn from their pension savings before 6th April. The money purchase annual allowance (MPAA) has increased by £6,000 – to £10,000. This means you can continue to build your pension pot and receive tax relief on your savings.
Finally, the pensions lifetime allowance has been reformed. The lifetime allowance tax charge has fallen to 0% – and will be abolished altogether in 2024. This means you can put money into your pension without fear of being taxed.
The National Insurance threshold has been frozen until 5th April 2028. This means that workers will pay 12% in NI contributions when their salary goes over the personal allowance of £12,570.
If you receive universal credit payments, your support will have risen from April 6th. The amount you will receive has increased by 10.1% in line with inflation. This rise is automatic – you do not need to do anything.
Those who receive personal independence payments (PIP) will also see a 10.1% increase in the amount they receive. This is also the case for those who get child benefit payments.
From 1st April, local authorities could raise council tax bills. In areas where the council has adult social care responsibilities, the amount could rise by 5%. For councils without these responsibilities, bills could be increased by 3%.
Each council has different rates, depending on your council tax band. Contact your local council if you are unsure of how this could impact you.
The last six months has seen the government giving households a universal discount on energy bills. The Energy Support Scheme, as it was named, gave households around £67 a month off their bills, to help people through the worst of the winter months. This support has now ended and will not continue into April.
The energy price guarantee, however, has been extended for another 3 months, until the end of June. This measure was put in place to ensure energy bills remain lower than the current energy price cap, making bills more affordable for millions. The current price guarantee is £2,500 per annum.
At the start of this month, water bills rose by the highest amount for 20 years. The 7.5% increase means that on average, customers will pay 31% more per year for their water.
However, this depends on your geographical location, who your water supplier is, and whether you have a water meter.
On 1st April, phone and broadband suppliers increased the prices they charge monthly, impacting millions of people.
Many suppliers have increased their prices in line with inflation, plus an additional percentage – often around 3.5% to 4%.
From the beginning of this month, the national living wage and minimum wage both increased across the UK. The national living wage is the rate paid to those over 25s. National minimum wage bands apply to those under 25.
18-20 year olds saw an hourly increase of 66 pence, 21-22 year olds saw an increase of £1, and 23-year-olds saw 92 pence added to their hourly wage.
From 2nd April, the amount employees can claim for statutory sick pay increased to £109.40 per week – a rise of £10.05. Sick pay can be paid for up to 28 weeks.
From 6th April, the tax you pay when selling an asset increased. Previously, you could make a profit of up to £12,300 before paying tax. However, this amount has now dropped to £6,000.
Those who receive income from dividends will now be forced to pay more tax – or even start paying tax for the first time. From 6th April, the tax-free dividends allowance is £1,000 – previously £2,000.
Tax-free savings in ISAs has been frozen – remaining at £20,000 per year. It has remained at £20,000 since 2017.
Car tax – or vehicle excise duty – has also been hiked in line with the Retail Price Index (RPI) of 10.1%. The amount you will now pay will depend on your vehicle and when it was registered. Electric vehicles are exempt from these increases until 2025.
Those in receipt of statutory maternity, paternity, adoption, shared parental and parental bereavement pay and maternity allowance will receive an increased amount. From 2nd April, the weekly payment increased from £156.66 to £172.48.