This post was first published by Croydon Advertiser on 01/04/2018.
Eight changes that will affect your benefits and taxes coming this month
Many of the changes could leave you paying more.
Now that April has arrived, there are about to be some pretty drastic changes to taxes and benefits.
Unfortunately, many of the changes will make your wallets and purses feel quite a bit lighter.
But every cloud has a silver lining. An increase in the minimum wage and personal tax allowance should see your wages increase.
But every silver lining has a cloud that could be offset by increases in other ways.
This is the full list of the key changes you need to know about – and how they might affect you.
Four Universal Credit changes
The four key benefit cuts coming in to force on April 9 are:
- Year three of the four-year cash freeze in working age benefits, affecting almost 11m families.
- The 3 per cent real terms cut in working age benefits this year is set to be by far the biggest of the four-year benefit freeze.
- A two child limit for benefit claims, costing up to £2,780 for a family having a third child. This will affect 150,000 families.
- Withdrawal of the family element of support for new tax credit and universal credit claims from families with children, costing up to £545 and affecting 400,000 families.
Minimum wage increase
After a long list of employers were ‘named and shamed’ for failing to pay staff the minimum wage, some of the lowest paid workers will be receiving an increase to the minimum wage.
The National Living Wage, which is the minimum rate paid to workers aged 25 and over, will go up by 4.4% to £7.83 an hour from April 1.
Alan Price is employment law director at Peninsula and he told the Liverpool Echo : “Employers need to be aware of these rate increases as a failure to apply them correctly could lead to enforcement action.”
We’ll all pay less income tax, but the rich benefit the most
The amount you can earn without paying income tax – known as the “personal allowance” – will rise from £11,500 to £11,850.
This will take a large number of low-earners out of tax.
However, as far as progressive policy goes it’s not popular with all the experts.
That’s because the change gives the same cash boost to all those earning more than £11,850, even if they’re millionaires who don’t need it.
The amount the richest 13 per cent can earn before paying the 40p rate of tax will also go up in April. It’s rising from £45,000 to £46,350.
New car tax rules
You could end up having to fork out up to a whopping £500 more for your car tax from this month.
That’s the warning from some, who are urging you to get yourself clued up on the changes to car tax.
The changes come into effect from April 1 – but this isn’t an April Fool.
Drivers need to note there are new rules around Vehicle Excise Duty (VED) bands.
The rules are designed to reduce pollution and will particularly target diesel cars that fail to meet tough standards.
At present, no new diesels conform to the standards, so the extra fee will apply to all new diesels sold.
Diesel cars that issue an excessive level of pollution, as measured against the Euro 6 emission standards, will pay extra tax, which can be anything from £15 to £500 in the first year, reports The Mirror .
After that there will be a flat rate depending on your vehicle.
The new rates
- £140 a year extra for petrol or diesel vehicles
- £130 a year extra for alternative fuel vehicles (hybrids, bioethanol and LPG)
- £0 a year for vehicles with zero CO2 emissions
Any car that produces more than 120mg/km of NOx will be forced to pay more for road tax in the first year.
The car tax increase will be applied to new cars bought after 1 April 2018 and not those registered before, so drivers with existing diesel cars will not pay more.
The Treasury says it thinks fewer than two million cars will be subject to the band jump, though cars like the Ford Fiesta are expected to see a £20 rise in the first-year rates.
Britain is one of the five member states that have received a “final warning” from the EU for breaching nitrogen dioxide limits – which have proven links to heart disease and lung cancer.
According to some studies, air pollution kills 50,000 people annually in the UK alone.
The penalties are designed to encourage drivers to adopt fuel types that are less polluting and less damaging to the environment.
If you bought your car before April 1, 2018, you won’t be affected by the new tax changes as it only affects cars registered after 1 April this year.
Older cars will continue to be taxed according to the old system of CO2 emissions.
If you are buying a new car, you may want to reconsider your fuel options, or aim for a pre-registered one to avoid the extra tax.
Help for 124,000 homeowners on hard times is being scrapped
Support for Mortgage Interest (SMI) is a benefit for homeowners who fall on hard times and struggle to keep up their mortgage payments.
It’s existed in some form since at least the 1980s and is currently paid for 124,000 people – almost half of them pensioners.
But not for long – the free benefit is being axed and turned into a loan instead from 5 April.
That loan will be secured on your house and billow with interest, a bit like the mortgage itself.
Personal finance groups have warned this will “weaken the safety net” and “add to the pressure” on families in desperate need.
It’s a little-known benefit but could become a big problem. To qualify currently, you must be on Income Support, Pension Credit, income-based Jobseekers’ Allowance or income-based disability benefit ESA.
The benefit can only cover interest charged by a bank, not the capital value of a house. It’s paid up to a total of £200,000, or £100,000 for pensioners.
Benefits are being frozen AGAIN
Inflation recently hit a five-year high and the 1 per cent pay rise cap in the public sector is set to be scrapped.
Yet Theresa May has frozen benefits for the third year in a row – part of a bid to slash £3.9billion a year by 2019/20.
That means apart from pensions, carers’ allowance and some disability benefits, the vast majority of welfare payments will be worth less as prices shoot up.
The freeze includes thousands of people on sickness payment Employment and Support Allowance (ESA).
Among ESA claimants, only carers, those in the “support group” or those receiving enhanced or severe premiums for disability will see a rise.
Disability and carers’ benefits, including all Personal Independence Payments (PIP), will also rise by the CPI measure of inflation. The vast majority of other benefits stay the same as they are now.
There will be a rise, however, to Work Allowances – the amount you can earn in Universal Credit before your benefits start being taken away. Allowances are rising from £397 to £409 (higher) and £192 to £198 (lower).
The State Pension is going up
Thanks to relatively generous Tory policies (compared to other areas), pensioners are free of the freeze that’s hit others.
The old-style basic state pension will rise from £122.30 to £125.95 a week for an individual based on their own contributions (category A or B).
If you’re on the new state pension it’s a rise from £159.55 to £164.35 a week.
Each of these changes is a rise of 3 per cent under the Government’s “triple lock”.
The lock ensures pensions rise each year by 2.5 per cent, average earnings or inflation, whichever is highest.
Housing Benefit claimants who move to Universal Credit will get more help
This is the final measure in a £1.5billion help package for Universal Credit claimants that was announced in November.
People on Housing Benefit who move to Universal Credit will now continue to get the old-style payment for two weeks after their transfer date.
Tory ministers bowed to pressure and agreed the move after campaigners warned people’s rent arrears were soaring.
The standard wait for your first payment under Universal Credit is now five weeks (cut from six earlier this year).
That means the gap between your housing benefit ending, and Universal Credit starting, should be much shorter than it was until now.