Today is the start of a new tax year. Yippee! I hear you cry! Well I heard you cry. There are a few things that have changed this month that you may or may not know about.
First some good news.
Annual ISA contribution limits are increased from Â£5,100 (cash) and Â£10,200 (stocks and shares) to Â£5,340 and Â£10,680 respectively allowing you ta save more money in a tax efficient manner. So you can either put the whole Â£10,680 in a stocks and shares ISA or save up to Â£5,340 in a cash ISA and put the rest up to a limit of Â£10,680 in a stocks and shares ISA.
The weekly basic state pension has gone up to Â£102.15 from Â£97.65.
The annual Capital Gains Tax allowance has increased from Â£10,100 to Â£10,600. So you can make a further Â£500 capital gain in the year without paying tax.
For those under 65 your personal allowance for income tax has increased to Â£7,475 from Â£6,475 (unless your personal tax circumstances dictate otherwise) giving you a little bit more money in your pocket every month. The Institute for Fiscal Studies (IFS) says this will remove 500,000 people from paying income tax altogether. For those between 65 and 74 the allowance goes up Â£450 to Â£9,940 and for those over 75 it goes up Â£450 to 10,090.
That is unless you are a higher rate tax payer because the allowance here has been dropped by Â£2,400 down to Â£35,000. This is designed to stop higher earners benefiting from the increased personal allowance. But it will also drag many more people into the higher 40% tax band, 750,000 according to the IFS. So bad news for them. For those earning over Â£100,000 your personal allowance still reduces by Â£1 for every Â£2 you earn over Â£100,000 (irrespective of age).
The bad news continues. Today also sees the government move from using the retail prices index for calculating increases in the state pension, benefits and allowances to using the currently less generous consumer prices index. So our state benefits and allowances are projected to increase more slowly in future years.
Child benefit has been frozen for three years so will not go up in line with inflation and other changes mean that those earning over Â£40,000 will see benefits cut.
For those wealthy enough to consider buying a home over Â£1 million a new stamp duty land tax (SDLT) rate has been introduced and you will pay 5% of the full purchase price, whereas it was previously 4% on property over Â£500,000.
Those saving for a pension could well be hit. In the past you could potentially save up to Â£255,000 a year tax free in a pension. This threshold has been drastically lowered down to Â£50,000, which is Â£40,000 net of basic rate tax. This obviously will only affect the wealthy.
All corporation tax now has to be paid on line and, if 'exceptionally' paid by cheque the payment will not be treated as received until it actually clears, not when they get the cheque.
If you are self employed and pay Class 2 National Insurance Contributions the payments now become due on the same dates as self assessment, 31st January and 31st July.
If you are an employer and you paid your PAYE (pay as you earn) late last year (2010-2011) you will be issued with a penalty.
VAT returns must now be made on on-line, if you send a paper return in you will be penalised.
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