As we approach the new tax year let us look at some of the changes that we will be facing. These will leave some of us better off but many will face higher bills. Let us look at some of the changes and the effects that they will have on us.
Introduction of a new Sugar Tax
This is a part of the government’s fight on obesity and bad health and follows from the research showing that as many of 8,000 cases of type two diabetes a year are linked to fizzy drink consumption. From April all drinks with a total sugar content above 5g per 100ml will be taxed at 18p a litre, while sugary drinks with more than 8g of sugar content per 100ml will be taxed at 24p a litre.
For instance, a classic 1.75l bottle of Coca Cola which currently costs around £1.66 has a sugar content of 10.6g per 100ml, meaning that the cost will increase by an extra 42p to £2.08 per bottle.
Changes in Car Tax
New car tax rules, introduced as part of efforts to cut back on toxic fuel, could end up costing diesel motorists anything from £20 to £500 more a year. From April, new cars that don’t meet new emissions standards will be pushed up a tax band for the first year on the road, increasing the amount of car tax payable. The new rules will only apply to new cars bought and registered after the April date. If you currently own a diesel car and it was registered before that date then you will pay your current car tax rate.
Minimum wage increase
In April the National Living Wage, the minimum rate for workers aged 25 and over, will increase to £7.83 an hour. At the same time the minimum wage for all other workers will also go up – including apprentices who will see their rates rise 5.7% from £3.50 to £3.70 per hour.
Increase in energy bills
The energy price cap for safeguarded and prepayment tariffs is set to rise by 5.6%, representing £57 per annum. This is a reflection of rising wholesale costs which are expected to rise further in the Spring. This tariff was introduced to help protect low-income households, many of whom are on pre-pay meters. It also includes one million households who currently receive the warm home discount.
Increase in Workplace Pensions
The monthly amount you contribute towards your workplace pension will increase on 1 April from 1% to 3%. This will reduce take home pay by £540 a year for the average earner. At the same time, the amount put in by your employer wii double from 1% to 2%.
Auto-enrolment is compulsory for employers, but not for employees, so if you want to opt out, you can after the first month of being on the scheme. To do this, you’ll have to tell your pension provider who’ll then refund you everything you’ve put in so far.
But think very carefully before you decide as opting out also means waving goodbye to all of the contributions to your pension that your employer has made.
Your Personal Allowance is Increasing
The Personal Allowance, which is the amount that you can earn before having to pay tax, is increasing on 6th April by £350 from £11,500 to £11,850. This will leave basic rate (20%) taxpayers better off by £70 a year. At the same time the higher rate threshold, where you start paying 40% tax, is increasing to £46,350 a year. This is worth £270 a year on top of the £70 everyone gets.
Mortgage Payers
The Support for Mortgage Interest (SMI) benefit for homeowners who struggle to keep up with their monthly payments will see some big changes. These payments cover interest on mortgages and are paid directly to the lender on behalf of the customer. Currently, 124,000 people benefit from it a year.
From April this is being replaced by a loan or “second mortgage” which must be repaid when the house is sold or when the claimant’s entitlement to the benefit comes to an end. Interest will be charged on the amount owed, and payments will change to a month in arrears, like Universal Credit.
Council Tax
Council Tax is about to increase by more than it has for many years. 95% of councils plan to increase council tax by 6% which would see the annual council tax cost for a typical property jump by £95 to £1,686.
Relief for graduates earning over £21,000
Last year, the Government announced that tuition fees would not rise this year, but there are a few important changes that new, previous (post-2012) and existing students need to know about.
From next month graduates will not have to start repaying loans until they are earning more than £25,000. Currently, you must repay 9% of everything you earn above £21,000.
If you graduated after 2012, and are currently earning exactly £25,000, this means that you will no longer have to repay your loan on the £3,999 that you are currently repaying it on. This means that you will be £30 better off a month or £360 a year.