We had some muttering about how early Easter was this year, with the usual questions about why Easter is such a moveable feast. Luckily there is no such confusion with the start of the new tax year on 6 April – safely away past any implications of April Fool’s.
New state pension – flat rate-ish
This year a number of important changes are taking effect today, not least of which is the start of the new state pension for newly qualified pensioners. Billed as ‘single tier’, the government aims to simplify the system by removing extra elements such as the second state pension. But it also means that over time pensions pay outs will become cheaper for government, who have stated that the short-terms winners are set to be the self-employed and some women.
The new state pension is set at a flat-rate of £155.65 a week. But it’s already clear that some new pensioners will not receive this amount and may be in for a shock. So the idea of a single, flat rate may not be quite as clear-cut as the government may like us to believe. People now in their 20s and 30s are unlikely to find their pensions measuring up to those of their parents when it’s their turn.
Speaking of pensions, the lifetime allowance for 2016/17 has now reduced by 20% from £1,250,000 to £1,000,000. You might need to consider claiming transitional protection.
Tax rates to watch
The other big change announced in the March Budget was an unexpected cut to the main rates of capital gains tax (CGT) for 2016/17. Higher and additional rate taxpayers will now pay 20%, with a 10% rate for other taxpayers. Gains on residential properties and carried interests however will remain at the previous rates of 28% and 18%.
If you’re a buy-to-let investor or are considering a second home, the change to Stamp Duty that took effect from 1 April might affect you – there’s now an additional 3% applied to purchases of additional residential properties.
On a basic level, the personal allowance has now gone up to £11,000. If your income is over £100,000, the allowance is reduced by 50p per pound of income over £100,000, so you might want to review your pension contributions or charitable gifts to benefit from the full allowance.
And don’t forget that as of today basic and higher rate taxpayers have a new savings allowance at 0% tax of £1,000 or £500.
So there’s quite a bit to take in and plan for over the next full tax year – for clients and advisers alike.