The new tax year has brought some important changes to the rules that it's important to be aware of.
Pension limits raised
The lifetime allowance, which sets a limit on the amount you can have in your pension has been reducing since the 2010/2011 tax year. This has now changed, with the limit increasing to £1.03 million, up from £1 million. In addition a 3% rise in the state pension is also set for those who reached state pension age after April 2016. For those who retired before that date, there will be an increase to £126 per week.
Death duty changes
The advent of the "residence nil rate band" of £100,000 means that inheritors will receive more due to the corresponding reduction in tax. This year, it rises again, to £125,000, bringing the total to £450,000 including the existing nil rate band. A couple therefore can pass £900,000 on in total.
More tax-free income
The £11,500 personal allowance is rising to £11,850, increasing the amount you can earn before any tax is applied. In addition, the 40% tax threshold has risen from £45,000 to £46,350.
Dividend allowance cuts
The reduction of the dividend allowance from £5,000 to £2,000 will impact both business owners that pay themselves in dividends, and investors.
Mortgage relief lowered
Mortgage interest relief continues to head towards being totally abolished. In the 2018/2019 tax year, deductability of interest payments as a business expense is now down to 50%. This will be totally removed in 2020 and replaced with a 20% tax credit.
Council tax rises
There isn't really a way to avoid these unfortunately as the amount that councils can increase bills by without a vote is now 6%, with councils predictably planning to use this new ability.
Contact Westminster Wealth Management today and one of our skilled advisers can construct a financial plan for you that will enable you to meet your financial goals.
A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation.
Information is based on our current understanding of taxation legislation and regulations which is subject to change.
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