We are entering a new tax year, which means a host of changes to the tax and benefit system are now underway.
Here are some of the most important ones and how they could impact your clients’ personal finances.
Increase in personal allowance
Personal allowance covers what you can earn each year before paying income tax.
And it went from £ 12,500 to £ 12,570. The government announced in the budget that it will be frozen at this level for the next five years.
Higher tax threshold
The time when people start paying the highest rate of income tax has also jumped.
Now people will only start paying 40% tax on their income when they start earning more than £ 50,271.
Statutory sickness benefit
Minimum payments that employees are on sick leave are also increasing.
Skilled workers will now receive £ 96.35 per week statutory sickness benefit.
Employment and support allowance
For those who benefit from ESA, the payments are about to increase. There are all kinds of different rates depending on age and marital status, but as an example, a single person over 25 will now receive £ 74.70, compared to £ 74.35.
The pension credit is a supplement for low-income retirees. For single beneficiaries it drops from £ 173.75 to £ 177.10, while for couples it drops from £ 265.20 to £ 270.30.
For those on maternity or paternity leave, the minimum income payments they can expect are at a weekly rate of £ 151.97.
Former students must earn a certain amount before they start repaying student loans on their behalf. And this earning threshold increases from April 6.
For Plan 1 loans the threshold drops from £ 19,390 to £ 19,895, while for Plan 2 loans it drops from £ 26,575 to £ 27,295.
Care allowance is a benefit paid to people with disabilities, which means that they need a caregiver to come and help them.
Today it drops from £ 89.15 to £ 89.60 at the highest rate and from £ 59.70 to £ 60 at the lowest rate.
The new tax year means a slight increase in the Caregiver Allowance, to £ 67.60 from £ 67.25.
Widowed Parents Allowance applies to deaths between 11 April 1998 and 5 April 2017. Beneficiaries will see their payments increase from £ 121.95 to £ 122.55.
The living allowance for disabled people is paid in two parts: the care part and the mobility part.
The care component itself is split into three tiers, and all are in the process of being scaled up, with the highest rate currently paying £ 89.60.
The mobility component is split into two tiers, and those two tiers increase as well, with the top tier increasing to £ 62.55.
Personal independence payment
PIP rates increase for tax year 2021/22. The improved life component goes from £ 89.15 to £ 89.60, while the mobility component goes from £ 62.25 to £ 62.55.
Labor tax credits
Work tax credits were increased by £ 20 last year in the wake of the pandemic, but this has now been removed.
Instead, it’s replaced with a one-time payment of £ 500.