Changes for the new tax year
Personal (income tax) allowance will increase from £8,105 to £9,440 for under 65s, but the rate is frozen at £10,500 and £10,660 for those aged 65 to 74 and 75-plus respectively.
Income tax bands - the higher-rate tax band starting point falls from £42,476 to £41,451, pushing 400,000 workers into the higher-rate tax bracket by 2015/16.
Additional rate income tax - this falls from 50% to 45% for earnings of more than £150,000.
The ISA allowance increases from £11,280 to £11,520, which is equivalent to a monthly increase of £20.
Junior ISA/CTF allowance - this rises from £3,600 to £3,720, which is equivalent to a monthly increase of £10.
The basic state pension goes up from £107.45 to £110.15 a week.
Available from 1 November 2011, the Junior ISA will replace child trust funds (CFTs), which have been phased out. Junior ISAs will have a £3,000 limit and will be offered by high street banks, building societies and other providers that currently offer ISAs to adults. You can invest in either stocks and shares or cash. But, unlike CTFs, there will be no government contributions into each child’s savings pot. Money invested in Junior ISAs will be “locked in” until the child is 18, and the ISA will default to an adult one.
There are limits to how much you can invest in any tax year. For 2011/12, the limit is £10,680. Of that, the maximum you can invest in cash is £5,340 and the balance of £5,340 can be invested in shares (individual company shares or investment funds). If you don’t take the cash ISA allowance, you can invest up to £10,680 into a stocks and shares ISA.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.