Sarah Pennells is a personal finance journalist and the face behind SavvyWoman.co.uk. We think she does a great job at explaining financial subjects in a very clear and accessible manner. You can find her column below where she writes about the latest financial news, and helps you get more from your money.
New tax year – all change
It’s the start of the new tax year on April 6th and this year there are lots of changes to get your head around. Here’s my rundown of the main ones:
- A rise in the personal allowance: you’ll be able to earn up to £11,000 before you pay tax at the basic rate. The higher rate threshold goes up to £43,000.
- The introduction of a tax-free savings interest allowance: this means you’ll be able to get up to £1,000 a year in interest from your savings (or £500 a year if you’re a higher rate taxpayer) without paying tax on it. That includes interest from money you have in your current account, money you have in any savings accounts and income from government and company bonds. If you earn more than £1,000 a year in interest you’ll pay the extra tax through PAYE or your self assessment.
SAVVY TIP: At current interest rates you’d be able to have around £60,000 in savings accounts and you’d still get the interest tax free if you’re a basic rate taxpayer. If you have cash ISAs, interest from these is already tax free so they’re not part of your £1,000 savings allowance.
- The rent-a-room allowance increases. If you rent out a room to a lodger, you will be able to get up to £7,500 a year in rental income and you won’t have to declare it to the taxman, if you use the rent-a-room scheme. That’s an increase from the old limit of £4,250.
- The way dividends are taxed will change. If you run your own company or you have investments in shares (that aren’t held in an ISA), then the way dividends are taxed will change. Dividends are paid by most companies and they’re basically a share of the profits. In the future, you’ll be able to get £5,000 a year in dividends without paying tax, but anything you get above that will be taxed.
- Peer-to-peer ISAs are launched. From today you’ll be able to take out an ISA (individual savings account) that invests in peer-to-peer lending – when you lend money either to an individual or a business. Up until now these accounts haven’t been able to be held in a tax-efficient ISA wrapper.
SAVVY TIP: Peer-to-peer lending can be a riskier option than ordinary savings accounts. Money you lend out is normally divided up so you only lend a fairly small amount to any one individual or company. But there’s still a risk that the person may not be able to pay it back or that the company fails. Unlike bank or building society savings, your money isn’t protected by the Financial Services Compensation Scheme if the peer-to-peer lender fails, although some do have a protection fund of their own.
All change for state pensions
A new state pension system is being introduced from April 6th. This doesn’t affect you if you’ve already reached state pension age, but if you haven’t, you’ll come under a new ‘flat rate’ state pension system. Once the new system is fully up and running, the most you’ll be able to build up will be £155.65 a week and you’ll need 35 years of National Insurance to get that.
If you’ve built up a state pension that’s worth more than £155.65 under the old basic state pension system, you’ll keep that higher amount. But most people will get far less than the full rate. In fact, figures from a parliamentary committee show that only 13% of people will get £155.65 a week in the first year.
First time buyer? Don’t make these mistakes!
If you’ve ever bought furniture checking that it will fit in your house, you’re not alone. Research by one insurer shows the most common mistakes that first time buyers make and almost a third (31%) say they’ve bought furniture without measuring it up properly. Luckily three quarters didn’t have any problems, but others did and 16% had to resort to taking a window out before they could get the furniture in their home. Yikes!
One in five first time buyers have failed to buy both contents and buildings insurance and one in ten only bought buildings insurance after they moved in. You’re responsible for the property after you’ve exchanged contracts – which typically happens weeks or even months before you move in. That means if there was a flood or the building was damaged by fire, you’d lose out if it wasn’t insured.
House sharing with friends?
If you live in a house share, how do you sort out the bills? New research shows that a quarter of housemates say they’ve bailed out a friend over utility bills and 45% of people who live together say they’ve fallen out over the way bills are paid. So how can you reduce the fall-outs and sort out your bills as friends?
- Use an app! There are a number of bill splitting apps that are designed to make it easier to share costs. They let you add housemates to your account, make a note of when you spend money on food and cleaning products etc and split bills between you.
- Look at the options for signing up for gas and electricity accounts. Check and see if there’s a limit to the number of names on a utility account. If you can’t have everyone’s name, it may make sense to nominate one or two people to have the accounts in their name. But bear in mind that if the bill isn’t paid, it could affect their credit rating – even if it’s someone else’s payment that’s missing.
- Understand who’s liable for what. If you’ve signed up to a joint tenancy, it means you’re each responsible for paying all of the rent, and not just your share. That means if one of you moves out or refuses to pay, the landlord could come after the others for the shortfall.
SAVVY TIP: There’s lots of useful information about your rights if you’re renting on Shelter’s website or on Citizens Advice.