Tax and benefit changes 2014/15

A number of tax and benefits are about to change.

With a new tax year almost upon us, there are plenty of changes set to take place on a range of tax and benefits.

Here’s a round-up of all the most important imminent changes.

Income Tax

The tax-free personal allowance is jumping from £9,440 to £10,000 from 6th April. Then from next year it rises again to £10,500.

The threshold for paying the 40% higher rate of Income Tax will increase to £41,865.

The tax-free Blind Person’s Allowance is increasing from £2,160 to £2,230, while the Married Couple’s Allowance (for those born before 1935) will increase from £7,915 to £8,165.

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Benefits

The various elements of the Working Tax Credit are increasing, though by very small amounts as the table below outlines:

There are also small changes to some parts of the Child Tax Credit:

Meanwhile, Child Benefit for the first child is increasing by just 20p to £20.50, for second and subsequent children by 15p to £13.55 and the Guardian’s Allowance is increasing 45p to £16.35.

National Insurance

The Class 2 rate of contributions is increasing from £2.70 a week to £2.75 from 6th April. The Class 3 rate jumps to £13.90 from £13.55. The Class 4 lower profits limit moves from £7,755 a year to £7,956, while the upper profits limit increases from £41,450 to £41,865.

State Pension

The Basic State Pension will increase by £2.95 a week, taking it to £113.10. The additional State Pension is rising from 2.2% to 2.7%.

Pension Credit is increasing from £145.40 to £148.35 a week for single people or from £222.05 to £226.50 for couples.

Alcohol and tobacco duties

Following the Budget, tax on beer has fallen by one penny a pint, while duties on spirits and other drinks exceeding 22% alcohol by volume and most ciders are frozen.

The duty escalator for wine and high strength sparkling cider has been ditched, but duties will continue to rise annually with inflation.

Tobacco duty has risen by by inflation plus 2%. So a packet of 20 cigarettes has gone up in price by 24p, while a packet of five small cigars has increased in price by 8p.

ISA allowances

ISAs are changing dramatically. The amount you can save in an ISA increases to £11,880 for stocks and shares and £5,940 for cash from 6th April. It is then jumping to £15,000 a year, though this change doesn’t take place until 1st July. Cash ISAs and Stocks & Shares ISAs are also then being merged into a single ISA.

The Junior ISA and Child Trust Fund limits are also increasing, first to £3,840 from 6th April then to £4,000 a year from 1st July.

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Premium Bonds

The amount you can put into Premium Bonds is increasing from £30,000 to £40,000 from June 2014. And from the August 2014 draw there will be two £1 million top prize winners.

Pension drawdown

The capped drawdown limit (the amount you can take in income from your pension instead of purchasing an annuity) is jumping from 120% to 150% of the value of an equivalent annuity.

And in terms of flexible drawdown, which allows you to withdraw your pension pot, the minimum income threshold you need from other sources to be eligible is being reduced from £20,000 to £12,000.

The maximum size of a small pension pot which can be taken as a lump sum is increasing from £2,000 to £10,000. And up to three pots of £10,000 can be taken, rather than two.

Corporation Tax

The main rate is falling from 23% to 21% from 1st April.

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