As the new tax year approaches, a multitude of personal finance changes loom on the horizon, impacting everything from ISAs to child benefit, and even the state pension. Finance experts are advising individuals to brace themselves for these changes in order to safeguard and optimize their financial situation.
One of the major changes to ISAs coming in April is the ability to make contributions to more than one of the same type of ISA each year, for both investment and cash ISAs. Additionally, the flexibility to transfer as much or as little as desired between different ISA providers will provide more options for savers and investors.
The tax-free allowance for capital gains tax (CGT) will be reduced by half from the current £6,000 to just £3,000, potentially resulting in a larger tax bill for those with gains. Furthermore, the highest rate of capital gains tax will be reduced from 28% to 24%, offering a tax relief for individuals selling properties.
In April, the dividend allowance will also be halved from £1,000 to £500, resulting in higher tax bills for investors and company directors.
Another significant change is the elimination of the pension lifetime allowance, which will be replaced by two new principal allowances for savers to consider – the lump sum allowance and the lump sum and death benefit allowance.
For parents, the child benefit threshold is increasing from £50,000 to £60,000, allowing those earning between £50,000 and £60,000 to receive more child benefit. Additionally, the free childcare hours will be extended to two-year-olds, providing 15 free hours of funding for two-year-olds from April.
In his Spring Budget, Chancellor Jeremy Hunt announced the second reduction to National Insurance for 2024, lowering the starter rate for National Insurance for employed people from 10% to 8%. Self-employed individuals will also see a reduction, with the Class 4 National Insurance rate dropping from 8% to 6%.
Moreover, the minimum wage will see an increase of more than £1 per hour from April, boosting the pay of the lowest earners in the UK. The state pension will also receive an inflation-busting 8.5% boost, with the ‘new’ state pension increasing to £11,502.40 per year.
However, alongside the numerous financial benefits arriving in April, individuals should also be prepared for heightened bills. Broadband, mobile phone, and TV package bills will see price increases tied to the RPI measure of inflation. Most councils are also raising their council tax by the maximum 4.99%, while the Energy Price Cap will decrease by 12% from April, making energy bills somewhat more affordable for many households.
As the financial landscape undergoes a significant transformation in April, individuals are advised to stay informed and take advantage of the benefits while preparing for any additional financial burdens.
Source: Laura Suter, director of personal finance at AJ Bell