News story

New tax year: changes coming into effect in 2016

New tax changes come into effect at the start of each financial year. Here’s a list of things coming into effect in April 2016.

Personal allowance changes

1. The personal allowance will increase to £11,000 and the higher rate threshold will increase to £43,000

The personal allowance is the amount of income you can earn before you start paying income tax. From April 2016 people on incomes of £11,000 or less won’t pay income tax. A typical basic rate taxpayer will pay £905 less tax in April 2016 as a result of changes made since 2010.

The point at which you pay the higher rate of income tax will increase to £43,000. A typical higher rate taxpayer will pay £818 less tax in April 2016 as a result of changes made since 2010.

2. The marriage allowance, the tax free amount which people can transfer to their husband, wife or civil partner will increase to £1,100

3. People renting out a furnished room in their home won’t pay tax on the first £7,500 they earn; up from £4,250 last year

4. Fuel duty remains frozen for the sixth year in a row

A small business with a van can expect to save £270 and the average driver will save £75, compared to pre-2010 fuel duty plans.

5. A new National Living Wage of £7.20 an hour for workers aged 25 and above is being introduced

A full-time worker on the current National Minimum Wage will see a cash earnings increase of £900 a year.

6. A new personal savings allowance of £1,000 (or £500 for higher rate taxpayers) is being introduced for the income that people earn on savings

If they are a basic rate taxpayer and have a total income up to £43,000 a year, they will be eligible for the £1,000 personal savings allowance. This means basic rate taxpayers will pay no tax on the first £1,000 of their savings income.

If they are a higher rate taxpayer and earn from £43,001 to £150,000, they’ll be eligible for a £500 personal savings allowance.

7. Savers will now be able to take money out of an ISA and put it back in later in the year without losing ISA tax benefits

ISAs are being reformed so that savers can withdraw money from their ISA and replace it later in the year without it counting towards the £15,240 annual ISA limit.

8. Employers will no longer pay employer National Insurance contributions (NICs) for apprentices aged under 25 who are paid less than £43,000 a year

Employers already do not have to pay NICs on under 21s on the same basis.

9. Businesses and charities will have their employer National Insurance bill cut by another £1,000 from April 2016, as the employment allowance rises from £2,000 to £3,000

This means businesses will be able to employ 4 people full time on the National Living Wage and pay no National Insurance at all.

10. Charities will be able to claim a 25% government top up through the Gift Aid Small Donations Scheme on up to £8,000 – a £3,000 increase

This means that each charity will be able to claim up to £2,000 of government support per year, up from £1,250 previously.

Published 6 April 2016