ICP077- Things you need to know in the new tax year

In this episode of the Informed Choice Podcast, Martin talks about the personal finance things you need to know in the new tax year. 

There is also a roundup of the latest personal finance news and an update from the world of Informed Choice.

Things you need to know in the new tax year

The new tax year started on 6th April 2016, bringing with it some changes to tax rates and allowances, as well as some investment and pension changes.

As promised in the podcast, here are the facts and figures you need to know.

The new personal allowance for 2016/17 is £11,000, up from £10,600 last year. 

There is no more age-related personal allowance for people born before April 1938, removing the dreaded age-allowance trap.

Higher earners face an income limit of £100,000 with their personal allowance reduced by £1 for every £2 of income over this limit, so earn over £122,000 and your personal allowance is reduced to zero.

The personal savings allowance is now in force, giving tax-free savings interest to those with taxable income of less than £16,800, or a £1,000 tax-free savings allowance for basic rate taxpayers and £500 for higher rate taxpayers.

Dividend income is subject to a new tax regime, with a £5,000 tax-free allowance and then income tax charged at 7.5% for the basic rate, 32.5% for the higher rate and 38.1% for additional rate taxpayers.

The marriage allowance increases from £1,060 to £1,100, allowing unused personal allowance to be transferred to a basic rate taxpayer.

Landlords and second-home buyers will pay a 3% stamp duty surcharge, applicable on completions from 1st April 2016 onwards. For existing landlords, the 10% wear and tear allowance is removed in 2016/17.

Capital gains tax rates are reduced from 20% to 10% for basic rate taxpayers and 28% to 18% for higher rate taxpayers, with the exception of capital gains on residential property sales (other than your principle private residence).

No change to the ISA allowance this tax year, which stays at £15,240. The Junior ISA allowance remains at £4,080. 

The new tax year saw the launch of the new Innovative Finance ISA, allowing peer-to-peer lending to be held within an Individual Savings Account for the first time.

The pension lifetime allowance is reduced from £1.25m to £1m for 2016/17. The annual allowance is reduced to as low as £10,000 for higher earners. Listen to episode 68 of the Informed Choice Podcast for more on these pension changes and to hear about the protection options available.

Personal finance news update

-The new state pension was introduced this week, offering a single flat-rate income to new pensioners from 6th April 2016.

-Fewer people are cashing in their pension savings, one year after the launch of new pension freedoms.

-The new National Living Wage has come into force, with workers over 25 now receiving a minimum income of £7.20 an hour.

-Over 11.5 million confidential files have been leaked from the database of international law firm Mossack Fonseca, revealing details of how the rich exploit secretive offshore tax regimes.

-HM Revenue and Customs has received more than £4bn in inheritance tax receipts during the past year, the largest amount ever received by the tax man in a twelve month period.

Get answers to your personal finance questions

Do you have a personal finance or investing question for Martin?

Email martin@icfp.co.uk or ask on Twitter @martinbamford.

You can call our dedicated podcast voicemail line on 020 8144 2745 with your question or visit www.speakpipe.com/InformedChoicePodcast to leave an online voicemail.

Martin and Informed Choice

Martin Bamford is a Chartered Financial Planner, Chartered Wealth Manager and SOLLA Accredited Later Life Adviser. As Managing Director of Informed Choice, the award-winning firm of Chartered Financial Planners in Surrey, he is responsible for nearly £200m of client assets.

Martin is the author of several bestselling personal finance books and produced his first feature-length documentary in 2014, about the post-war Baby Boomer generation in retirement.

“Bamford excels at making even the dullest topics interesting” – Pensions Management

Visit www.icfp.co.uk to find out more about Informed Choice, or follow us on Twitter at www.twitter.com/informedchoice.