Tax

What Do You Know About New Pension And Tax Rules?

April 6 is the start of the new financial year, and this year, a host of new pension and tax rules start.

As a retirement saver and investor, several will affect you.

Here’s a run-down of some of the points to watch:

Pension contribution allowance drops 60%

Your MPAA or ‘money purchase annual allowance’ falls from £10,000 to £4,000 a year from today.

The allowance dictates how much someone who has already exercised their pension freedom to draw money from their retirement savings can put back into the fund.

State pension increases

The new state pension rises from £155.65 to £159.55 a month, while the old state pension increases from £119.30 to £122.30

Personal tax allowances up

If you pay UK income tax, the personal allowance rises to £11,500 from £11,000, which means you can earn £11,500 before paying income tax.

The dividend allowance stays at £5,000, the personal savings allowance at £1,000, although higher rate taxpayers (40% and above) only get £500.

Pension advice allowance

Retirement savers can take £500 tax-free from their pensions to put towards financial advice from April 6.

The pension advice allowance can only be accessed once in a tax year, but like wishes from a genie, is available three times while the pension is live.

Leaving your home to children

The first phase of the inheritance tax main residence nil-rate band comes into force.

The new relief extends the nil-rate band from £325,000 to £425,000 this year, rising to £500,000 in stages by April 2021.The rate doubles for couples.

The new band lets someone pass their main home to a child or their direct descendants.

CGT changes

The individual annual exemption rises to £11,300.

Saving in ISAs

The personal allowance for ISA savings rises to £20,000 for an individual

Landlord tax changes

Expat landlords should be aware the first phase of mortgage interest relief is cut from April 6 and is phased in over three years.

The intention is to reduce relief for higher rate taxpayers from 40%/45% to 20%.

A new way of calculating property business profits also starts with the new tax year. The result is around 440,000 landlords are expected to pay more tax.

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