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With the new tax year having started yesterday we find ourselves facing a complete overhaul of the tax system that will affect (pretty much) every one of use. Well, it’s not exactly a complete make-over, but still relevant enough to have a noticeable impact. Since my post “What the taxman claims” still holds the pole position of popular posts (awesome alliteration!), I figured it was time to update the spreadsheet that comes with that post to reflect the new tax regime. A version 2.0 if you like…

But before I’ll share a link with you that you can use to download the new version of the tax spreadsheet, a short summary of what exactly has changed since we last wondered how much tax the government was getting from us:

• Personal Allowance: This tax-free allowance was increased from previously £5,225 to £5,435 - a 4% increase to keep up with inflation, if you really wanted to know. As long as you’re under 65 years old this is the amount you don’t owe the government a penny on (per tax year).
• Tax rates: As of yesterday there is no such thing as a 10% tax rate anymore. It has been completely abandoned in favour of reducing the basic tax rate from 22% to 20%. No changes to the 40% tax rate though I’m afraid - except for the threshold after which you will have to pay it. Once your personal allowances is fully used, you can expect to pay 20% tax on the next £36,000 you earn a year. Hence, any income that goes beyond £41,435 (£1,500 higher than before!) will be taxed at 40%.
• National Insurance: In line with the tax amendments, National Insurance contributions were adjusted as well. The basic threshold now lies at £90 p.w. (or £4,680 p.a.) below which you don’t have to make any contributions at all. After that, you are expected to pay 11% of your gross pay up to a limit of £770 p.w. (£40,040 p.a.) followed by 1% of everything that exceeds £40,040. Last year’s 1% threshold was fixed at £34,840 which means that people can now expect to pay slightly more NI as the 11% rate applies to a further £5,200.
• Student loan repayments: No change here Earnings threshold is still sitting at £15,000 p.a. beyond which point you are expected to pay 9% of the remainder (i.e. everything beyond 15k) to settle your debt.

That’s a very brief summary of what’s going to change this (tax) year. The only additional change I have made to the spreadsheet concerns non-taxable benefits. If you are, like me, fortunate enough to be in a position were you get certain benefits from your employer which are deducted from your salary pre-tax, then you can now take these into account when calculating your annual tax due. Just add them into the cell below the bonus payments and it will be automatically deducted from your gross annual salary and not taken into account for the tax, NI and student loan calculations.

And now here it is - the one thing you’ve been waiting for while I’ve been rambling about boring tax changes: the new spreadsheet! Download it here.

A year ago on Simple Pound: Investment Choices - Index Funds

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