TThe new fiscal year starts this week and for many, that means people are worse off. Spiraling energy prices and rising inflation are top of mind for many homeowners. But changes to the tax system coming into play this week, and some bill increases that have received less attention in the press, will also cause a headache.
National insurance and dividend tax
Since Wednesday, the controversy increased national insurance contributions (NICs) It will enter in vigor. Announced last year, the government says the increase is to fund social care and the NHS.
Under the changes, both employed and self-employed workers will pay 1.25 pence more per pound. Employees will be charged 13.25% on earnings between £9,568 and £50,270 and 3.25% on earnings above. For the self-employed, class 4 contributions will rise to 10.25% and 3.25%.
However, there will be a reprieve in July, when the threshold at which NICs start being paid will rise from £9,880 to £12,570. Accounting firm Blick Rothenberg says those earning up to £41,389 will be better off than they were in the last fiscal year, but their pay will fall before then under the new regime.
Once your income exceeds that figure, you will still be worse off than you were in fiscal year 2021/22.
For an employed worker earning £50,000, the effect of the two changes will be a decrease in take-home pay of around £200 a year.
The tax on stock dividends will also increase by 1.25 percentage points, which will especially affect people who depend on dividends as part of their income.
Investors can earn up to £2,000 before having to pay taxes. Then, basic rate taxpayers will pay 8.75%, while for those with a higher rate it will be 33.75%. A base rate taxpayer who receives £10,000 in stock dividends will pay £700 in tax, compared to £600.
Income tax deductions
In last year’s budget, Foreign Minister Rishi Sunak announced that the personal allowance threshold would be remain unchanged until 2026, instead of increasing in line with inflation.
This means that the tax-free personal allowance remains at £12,570 for this year; above that threshold, the 20% income tax kicks in. The threshold for the highest rate income tax in England, Wales and Northern Ireland, when workers start paying 40%, has been frozen at £50,270.
The effect will be to draw millions more workers into the tax net. As employees get pay raises, they will be pushed over thresholds. If your employer has given you a raise to help you keep up with inflation, you may end up with less in your pocket than expected.
Steven Cameron, director of pensions at Aegon, says: “A person who earned £30,000 last year, who receives a national average pay rise of 4.8%, will pay an additional £693 income tax next year. anus”.
Water bill increase
While many people will focus on the rising cost of their energy, most homes also see an increase in water rates. Overall, bills rose 1.7% in England and Wales, raising the typical bill by £7 to £419, according to Water UK, the industry body.
National Energy Action, a charity that works to eradicate energy poverty, says there are big regional differences.
In the South East, customers will potentially see reductions in their bill of 6.2%, but those in the North East of England may see increases of 10.8%.
National Energy Action’s Jess Cook says the charity hopes to see a significant rise in the number of people not paying their bills as they struggle with the rising cost of living.
In many cases, the water bill is the first to go unpaid, he says: “This needs to be recognized for what it is, the first sign of substantial hardship, and support needs to be available to households at this point to prevent indebted”. .”
All water companies offer a social tariff, or a reduced bill, to customers experiencing financial difficulties.
Meanwhile, the WaterSure scheme helps people who use a lot of water for medical needs and receive benefits from their bills.
Councils across the country have increased their bills, with average D-band demand rising 3.5% to £1,966 a year. an increase of £68 from last yearaccording to figures from the Department of Planning, Housing and Communities.
The most expensive Band D council tax is found in Rutland in the East Midlands, where residents pay £2,300, followed by Nottingham, Dorset and Lewes and Wealden in East Sussex. The lowest rate for Band D is in Westminster, where bills are £866 a year.
Consumer advocate Martin Lewis has called on homeowners to ensure they are in the correct tax band and to challenge it through gov.uk website, or through the Agency’s Appraisal Office.
Council taxpayers in England in bands A to D will get a £150 refund on their bills this month, which they won’t have to pay back, as part of the government’s plan to ease pressure during this period of rising costs. The money will be deposited directly into the bank accounts of those that have a direct debit set up with your local council, but anyone who pays by other means will have to make a claim.
And watch out…
The long-term decline in the number of mailers, coupled with rising inflation, means the price of stamps will rise starting Monday. A first-class stamp will go up from 10 pence to 95 pence, while a second-class stamp will go up from 2 pence to 68 pence.
Meanwhile, anyone hoping to fly long distances after the pandemic restrictions will see the effect of increases in the Air Passenger Duty, a tax on passenger flights from UK airports. The fare for long-haul economy flights will increase by £2, while premium economy and above will increase by £5 from Wednesday.