New tax year - Understand your finances

Posted on: 08 February 2013 by Andrew Stallard

How to stop new tax allowances cutting into your disposable income

Disposable income falling2013 is racing onwards and it's February already. Is it really more than a month since Christmas? It might seem hard to believe, but it really is. And it's at this time of year that some of us think about those resolutions we haven't managed to keep - we've resigned ourselves to the fact that our determination to visit the gym at least twice a week isn't going to happen and instead, we have started thinking about cutting back on something for Lent.

This year, Shrove Tuesday, better known as Pancake Day, is the 12th February, so make sure you have your supplies of flour, milk, eggs and lemon juice at the ready! Lent starts the next day on Ash Wednesday. For some, Lent is a religious observance, for others, it's become a way of kick-starting a healthier lifestyle or taking on a challenge.

Abstinence isn't for everyone, however, and doing without isn't always the best option. A few of us here at Worldwide might admit that a bit of doing without chocolate and cakes wouldn't do any harm, but when it comes to finances, it's a little more complicated.

In fact, with a review of your finances, including your tax allowances and whether you are using them to their full potential, you could well find that you can do a little more with what you have, without doing without.

New tax year

We're edging towards the middle of February, and the start of April isn't too far into the future. And April (the 6th, to be exact) means the start of the new tax year when we all get a new set of tax allowances. One of the big stories from last year's budget from Chancellor George Osborne was the lowering of the 50p rate of income tax to 45p, a tax cut for the highest earners. Also making headlines was the announcement that the personal allowance - the amount we can all earn without incurring any tax - will be raised to £9,205 if you are under 65, with the intention of it increasing again to £10,000 in 2014.

The three main bands of tax are the basic rate at 20%, the higher rate at 40% and the top rate at 45%. The HMRC website has details of the tax bands as well as the new allowances. (1)

Although the personal allowance for those under 65 has increased, the age-related allowances have been frozen. HMRC give the following information on their website:

  • 'From 2013-14, the age-related personal allowances will not be increased and their availability will be restricted to people born on or before:
  • 5 April 1948 for the allowance worth £10,500; and
  • 5 April 1938 for the allowance worth £10,660.
  • Legislation will be included in Finance Bill 2012. People born on or after 6 April 1948 will be entitled to the personal allowance of £9,205 for 2013-14.' (1)

Individual saving account (ISAs)

There is better news for all of us, regardless of age, with the new ISA allowances. From the 6th April, your new ISA allowances are as follows:

The annual ISA investment allowance will be increased to £11,520. Up to £5,760 of that can be saved in a cash ISA. The remainder of the £11,520 can be invested in a stocks and shares ISA with either the same or a different provider, or you can invest the full £11,520 in a stocks and shares ISA. (2)

If you haven't taken advantage of your ISA allowance before, take the opportunity now. Here's an idea - if you are giving up something for Lent, use the money you save to put towards investing in an ISA, which could in the future mean that you've a little extra to treat yourself with

For a review of your finances including your ISAs, call Andrew Stallard free on 0800 0112825, e-mail or take a look at our website WWFP.

1.HMRC - personal allowances
2.HMRC - ISA allowances

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