Here we combine key points from the Spring Budget and what tax rates and thresholds are changing for the new tax year so you can understand what key things could impact on your finances so you can plan for the new tax year.
Get tax planning adviceEvery year, the “New Tax Year” seems to creep up on us all. We start the New Year off with a bang and good intentions for improvement. By the time we reach “Blue Monday” on 17th January our resolutions are pretty much out the window. The Spring Budget then came quickly around the corner and as the daffodils awake we realise it’s nearly April 6th, the start of a new tax year. Here we combine key points from the Spring Budget and what tax rates and thresholds are changing for the new tax year so you can understand what key things could impact on your finances and help you plan for the new tax year.
Saving for a house deposit is hard and last year there were fewer low deposit mortgages around because of the pandemic. In the Spring Budget the Chancellor promised to turn ‘generation rent’ into ‘generation buy’ as he announced a new guarantee scheme that aims to incentivise lenders to provide mortgages to people with a 5% deposit for properties worth up to £600,000. This means that 95% mortgages will be back from April in the form of this new government-backed scheme. Lloyds, Barclays, Santander and HSBC have already signed up to the initiative. If you are looking to purchase a property, mortgage advice is one of the areas of financial planning Unividual provides to clients.
The Stamp Duty Holiday has been extended to the end of June also. This means people purchasing a house or apartment up to the value of £500,000 will pay no stamp duty. Within half an hour of the announcement, Rightmove reported that the use of their mortgage calculator jumped by 85%. They also reported that based on the current sales that have been agreed in England, 80% of them would pay no stamp duty due to the holiday. There will be a further extension on homes bought up to a value of £250,000 until the end of September. Stamp duty rates are complicated at the moment so delve a little deeper to find out exactly what you would pay.
On March 31, the current Help-to-Buy scheme, which offers people extra money up-front if they buy a new-build home with just a 5% deposit, is ending. A new help-to-buy scheme has gone live for first-time buyers who can borrow from 5% to 20% (40% in London) of the full purchase price of a new-build home. The current shared Ownership is also changing and the minimum share a buyer can purchase in a home is moving from 25% to 10% at the end of March.
More than half of local authorities have set out plans to increase council tax by the maximum 5% this April. That will mean increases of between £50 and £100 for band D properties, which paid an average of £568 in 1993 compared to £1,817 this year. Not many people know that you can get a 25% discount if you live alone, are living with a full-time student or living with someone with severe mental impairment such as dementia.
Energy bills are due to rise from April because the energy price cap level will rise to £96. Get on to a price comparison site and see if you can find a cheaper tariff, perhaps with a fixed deal.
The cost of the TV licence fee will rise from April also, from £157.50 to £159. Did you know that if you are blind you could be entitled to a 50% reduction and care home residents can also qualify for a discount of £7.50. Take note that people over the age of 75 must also now pay for a TV Licence. There are also some small increases to NHS prescription charges.
When you combine this with other areas of increasing costs it all adds up and now could be a good time to look at outgoings and revising budgets. If you want to find out more about starting good money habits take a look at our Guide to Managing money in your 20s and 30s.
Known as the triple lock system, each year state pensions increase, either in line with earnings, the consumer price index (CPI) or 2.5%, whichever is highest. Inflation was 0.5% in September and earnings have remained low throughout 2020 so from April, the state pension will rise 2.5%, bringing it to a total of £179.60 a week for people with full credits on the new-style pension. This means retirees will get up to an extra £228.80 a year. Those on the old full state pension, will get an extra £3.40 a week, increasing the weekly pension to £137.65, which results in an extra £176.80 over the year.
New minimum wage rates come into force in England on 1st April with the National Living Wage rising to £8.91 an hour. The NMW will also now apply to people who are 23 and 24 years old instead of for people over the age of 25. This means 23 and 24-year-olds who are currently on £8.20 an hour will see their pay jump by 71p to £8.91 next month. Maternity, paternity, adoption and shared parental pay is increasing to £151.97 a week. Statutory Sick Pay (SSP) rates are also rising to £96.35 a week.
The furlough scheme will be extended until the end of September 2021. Employers will be asked to contribute more in July (an additional 10%) and August (20% more) until the scheme is phased out. Self-employment income support is also continued until the end of April, with a fourth grant to cover 80% of average trading profits.
We recently produced a full breakdown of the 2021/22 tax tables listing all changes. To summarise some key changes for April 6th:
According to Age UK around 1 in 7 who should be claiming Housing Benefit to help pay their rent are missing out. Almost £3 billion of benefits aimed at older people goes unclaimed a year and over a million pensioner households are missing out on Pension Credit. It is easy to check with the DWP if your family members could be utilising these benefits.
Everyone is unique, their personal circumstances are different and what they hope to achieve out of life is personal to each individual. There isn’t one financial planning strategy that works for everyone because your situation and the mixture of your different income steams, savings, debts, outgoings, retirement pots and investments is unique to you. When it comes to managing your finances you can choose to do it yourself, choose to work with a financial adviser or choose to do nothing at all. If you have made a decision to manage your own finances you need to look at the tax year from different angles and not just plan for this year but for the future as a whole. Thinking longer term prevents you from reacting in a ‘knee jerk’ manner to big changes, like some people who sold shares in April 2020 and crystallised their losses instead of keeping their money invested for when the markets recovered.
Some people really enjoy managing their own finances and this has born a generation of DIY investors. If you are in this camp feel free to take a look at our free financial planning guides. However, if you are worried you don’t have the knowledge or experience to manage your own money or indeed doing all of this just looks like a part-time job in itself, then you can start to consider using a financial adviser. There are also a lot of hidden benefits to financial advice a lot of people don’t know about.
