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UK tax and benefit changes 2018/19

Last November the Chancellor, Philip Hammond, delivered the Budget for 2018/19. These changes take effect in April 2018 and will see some significant tax changes come into effect, as well as the usual uprating of tax thresholds.

Income Tax

The amount you can earn without paying income tax, usually known as the personal allowance, is going up from £11,500 to £11,850. Meanwhile, the amount you can earn before paying the 40% tax rate will rise from £45,000 to £46,350. It's part of the government's plan to raise the personal allowance to £12,000 and the higher-rate threshold to £50,000 by April 2020. This year's hike should save typical basic rate taxpayers £70, while higher-rate taxpayers will save £340 a year.

Income tax in Scotland

For the first time this year, Scottish taxpayers are going to face different tax levels to those in the rest of the UK. The tax-free personal allowance stays the same but then there's a starter tax rate of 19% for income between that and £13,850. Between £13,851 and £24,000, taxpayers will pay basic rate at 20%, but between £24,001 and £43,430 they will pay a new intermediate rate of 21%.

The higher rate kicks in at £43,431 to £150,000 and is 41%, while anyone earning more than that will pay the additional rate of 46%. With these changes, anyone earning less than around £33,000 will pay less tax while those earning more will pay more than if they lived south of the border.

The Blind Person's Allowance

An extra amount of income that blind people living in England and Wales can earn without having to pay tax is rising from £2,320 to £2,390.

Council tax

From 1st April, households face inflation-beating hikes in council tax of up to 6%, as councils have been given the power to adjust the monthly bill upwards. The deal is that half the extra cash will be spent on social care, while the other half will support council spending.

Marriage Allowance

The Marriage Allowance is rising from £1,150 to £1,185 from 6th April 2018. This tax break allows those that are married or in a civil partnership to transfer part of their tax-free personal allowance to their partner.

National Insurance Contributions

From the start of the new tax year, the National Insurance Contributions (NIC) thresholds for employers and employees rise from £157 to £162 per week, or £8,424 a year. On top of that, the upper earnings limit is to increase to £892 per week or £46,384 a year; that's in line with the threshold for 40% Income Tax.

Inheritance Tax

The tax-free inheritance allowance remains at £325,000 going into the new tax year, as it has since 2010-11. There is an additional tax-free allowance if you pass your home onto your children, including adopted, foster, stepchildren, grandchildren and the children and grandchildren of your spouse. That property value allowance rises from £100,000 to £125,000 in the 2018/19 tax year. In fact, it will rise by £25,000 each year until 2021, when it will reach £175,000.

Capital Gains Tax

The tax-free allowance for Capital Gains Tax (CGT) - a levy on the profits made from the sale of assets - will rise from £11,300 to £11,700 from 6th April 2018. CGT rates charged above the threshold will remain at 10% (18% on residential property sales) for basic rate taxpayers or 20% (28% on residential property sales) for higher rate taxpayers in 2018/19.

Minimum wage

The National Living Wage (the new name for the minimum wage) for those aged over 25 will increase by 4.4% from £7.50 to £7.83 an hour. For those aged between 21 and 24, it will rise by 4.7% to £7.38 an hour, while anyone aged between 18 and 20 can expect at least £7.38 an hour, up from £7.05. Teenagers aged 16-17 will enjoy a rise of 3.7% to £4.20, and apprentice wages will jump 5.7% to £3.70 an hour.

State Pension

The State Pension is to rise by September 2017's inflation figure of 3% instead of the annual inflation figure of 2.5%. Those pensioners fully entitled to the new State Pension will see their payments increase by £4.80 from £159.55 per week to £164.35 a week. The change means they will be nearly £250 better off by the end of the tax year, with total annual income boosted from £8,296.60 to £8,546.20. And those that receive the full old Basic State Pension will see their weekly payments increase by £3.65 to £125.95.

Support for mortgage interest (SMI)

The SMI scheme has existed for decades and was designed to help homeowners who are struggling to manage their mortgage payments. It's now coming to an end. From 6th April it's being scrapped and replaced with a loan, secured against the home and charged interest, much like a mortgage.

Benefits

While inflation remains high, benefits are to stay frozen for a third year. There are some exceptions; pensions, some disability benefits and carers' allowance. Most benefits will not rise, meaning they will be worth less as the cost of living rises.

Tax Credits

The basic element of working tax credits, the couple and lone parent element and the 30-hour element all remain unchanged in the new tax year. The disabled worker element is rising from £3,000 to £3,090. The severe disability element is moving up from £1,290 to £1,330.

Bereavement Benefit

The system of Bereavement Payment, Widowed Parent's Allowance and Bereavement Allowance was replaced by the Bereavement Support Payment for those that lost a partner after 6th April 2017. The lump sum remains unchanged in the new tax year. For those parents who were already claiming the Widowed Parent's Allowance and can therefore continue to do so, it's rising from £113.70 to £117.10 a week.

Universal Credit

While benefits are to remain frozen in the new tax year, those who claim Universal Credit will be able to keep more of what they earn from working before their benefits are reduced. The 'Work Allowances', which are how much can be earned before benefits begin to be cut, will rise from £397 to £409 (if you don't receive housing support) and £192 to £198 (if your Universal Credit includes housing support).