The annual budget was announced this month and it often brings some changes to your savings and tax – here, we take a look at how some of this year’s announcements could affect your finances.
Savings & Pensions:
ISA Limit increase to £20,000:
The amount you can invest will rise on 6 April to £20,000 a year - meaning savers can now invest more money in this tax-free savings option. Every year you can invest your funds up to April 5 – any money invested after this date will move into the following tax year’s limit.
There are other types of ISAs available and from this year you might be able to split your ISA allowance between several different ISAs e.g. a Cash ISA and the new Lifetime ISA (see below)– it’s best to speak to your ISA provider to find out how the new changes affect your individual ISA accounts.
This year the government will launch new Lifetime Individual Savings Account (LISA) for those aged between 18 and 40. You can save up to £4,000 a year in a Lifetime ISA until you turn 50. This amount counts towards your overall ISA allowance and you could receive a government bonus worth 25% of your contribution (up to £1,000 a year).
Some or all of the balance can be used to buy your first home, or be accessed tax-free from age 60 to help fund your retirement. Government charges will usually apply if you want access to your money earlier.
Protecting your money:
The chancellor announced a crackdown on subscription traps that trick consumers by turning a month’s free trial into a regular paid-for service. The Government is launching a bid to try and stamp out confusing small print and unexpected, hidden fees that can lead to people spending money without their knowledge. More information will be set out in a green paper later in the spring.
State pension Increase:
The new state pension for those who reached state pension age from 6 April 2016 will increase from £155.65 per week to £159.55. People who reached state pension age before this date will see the weekly amount rise from £119.30 to £122.30.
The amount you can earn before paying income tax - the personal allowance - is currently at £11,000 and will go up to £11,500 for the next tax year. The government has promised this will rise to £12,500 by 2020-21. The threshold for higher rate will go up from £43,000 to £45,000, except in Scotland where it will be £43,000.
Family tax credits:
Any family which has a third or subsequent child born after April will not qualify for Child Tax Credit, which can be more than £2,000 per child. This will also apply to families claiming Universal Credit for the first time after April.
The family element of child tax credits, worth £545 per year, will be abolished. So families in which the eldest child is born on or after 6 April will not receive this payment.
Changes to Inheritance Tax:
Changes to Inheritance Tax (IHT) come into play this year including a new ‘family home allowance’ (eventually worth £175,000 per person on top of the existing £325,000 tax-free allowance), which will start to be introduced in April. This means that in 2020 individuals can pass on assets worth up to £500,000,including a home, without paying any Inheritance tax at all. (Making a total of £1million for married couples).
The new allowance will be introduced gradually - £100,000 in 2017-2018, £125,000 in 2018 – 2019, £150,000 in 2019-2010 and £175,000 in 2020-2021.
The new allowance will not be available to everyone though – including those without children, or to many business owners.