Yesterday, the personal allowance for basic rate income tax rose slightly by £70 to £12,570, while the higher-rate threshold climbed by £270 to £50,270. These rates are now frozen until 2026, while the capital gains tax annual exemption is frozen at £12,300, and the inheritance tax nil-rate band at £325,000. There is better news for those claiming state pension. As of April 6, the new state pension increases from £175.20 per week to £179.60, while the basic state pension climbs from £134.25 to £137.60. These are worth around £230 and £175 a year respectively.
Under the triple lock, payments rise in line with earnings growth, inflation or 2.5 percent, whichever is higher.
This year’s rise of 2.5 percent is comfortably ahead of earnings growth and consumer price inflation, which stood at 0.4 percent in the year to February.
Kate Smith, head of pensions at Aegon, said pensioners could enjoy a “bumper increase” next year if earnings rebound strongly but warned the triple lock could be a target as the Treasury tries to balance the books.
The marriage allowance has increased by £10, to £260 a year.
Couples can backdate claims for the previous four tax years, with the total rebate now worth a maximum £1,220.
Couples are eligible if one pays basic rate tax and the other pays no tax, as they can transfer £1,260 of unused personal allowance. The Chancellor has frozen the total amount you can save tax-effectively in a pension, known as the pension lifetime allowance, at £1,073,100.
Smith says that may sound like a huge sum but only buys an index-linked income of £26,100 a year at age 65: “Many of those affected have being doing the right thing by saving regularly.”
The living wage rises only slightly from £8.72 to £8.91 per hour, but this could bring outsize pension benefits. Smith said: “All those working more than 22 hours a week will now meet the £10,000 minimum earnings threshold and qualify for a workplace pension under the auto-enrolment scheme.”
They will need to contribute 4 percent of salary but will benefit from a valuable 3 percent employer pension contribution and 1 percent from the government, worth £400 a year for someone earning £10,000.
The Isa allowance has been frozen at £20,000 this tax year, with a further £9,000 for the junior Isa. However, the Lifetime Isa, which gives younger savers a £1,000 top-up on contributions of up to £4,000, is slightly less attractive.
The early exit penalty was temporarily reduced to 20 percent to support younger people raid savings during the pandemic, but now returns to its previous 25 percent.
OpenMoney co-founder Anthony Morrow said the Lisa is still attractive: “This is still a chance to grab free money.”