6 personal tax changes for 2017
The new budget is in effect, and it means more cash in your pocket or savings: find out the six key personal tax changes that will affect your pay.
1. Extra money in your pocket
From April, your tax-free personal allowance rises to £11,500, which means an extra £100 in your pocket per year if you are a basic rate taxpayer, or £200/£225 for higher or additional rate payers.
Well, at least until 2018, when it goes up again in order to meet the Government's goal of a tax-free allowance of £12,500! The basic PAYE code for 2017/18 will be 1,150L.
2. Higher rate threshold shifts upwards
The main higher rate threshold goes up to £45,000 (personal allowance of £11,500 plus a basic rate band of £33,500) but remains at £43,000 in Scotland for earnings and pension income.
3. Personal savings allowance
Basic rate taxpayers will be able to earn £1,000 of savings income tax-free (£500 for the higher rate, nil for additional rate), and taxpayers are expected to declare any amount over this limit to HMRC. Given that the majority of savings interest is paid gross, the onus is on the taxpayer to make these declarations.
However, you would also need to save a considerable amount to generate £1,000 of savings interest! The PSA now includes corporate bonds and gilt funds.
4. Save for life events or retirement
The Lifetime ISA (LISA) means that people aged between 18 and 40 can save up for a first-time home (up to £450,000), with payments continuing up until age 50. For retirement savings, you can withdraw the money without penalty after age 60.
You will be allowed to save £4,000 per year, with a 25% Government bonus. There are penalties for withdrawing your savings prior to buying a house or using your retirement fund, so once you commit your money, it should stay committed. The money you do save will be tax-free.
5. ISA is increasing
The annual maximum contribution allowance has increased to £20,000 meaning there is potential to earn more tax-free interest or dividend income!
6. If you're a landlord...
Tax relief on buy-to-let loans for residences is now restricted for higher-rate taxpayers, but basic-rate taxpayers will continue to receive the same relief rate.