new-year-2841111_1920 copyThe new year brings a number of financial changes that could impact your finances, so here’s what you should be looking out for in 2018:

State Pension:

The State Pension will rise by 3% from April thanks to the triple lock, which means the State Pension must rise each year by the highest of either earnings, inflation or 2.5%.

Lifetime allowance:

The lifetime allowance will rise next year for the first time since 2010. Over the years, the allowance has been gradually cut from £1.8 million to £1 million but an inflation-linked rise in April will see it increase to £1,030,000.

The lifetime allowance is a cap on how much you can build up in your pension pot. If you go over the limit you may face tax charges.

Dividend allowance:

The dividend allowance, the amount of dividend income you can earn tax-free, is being reduced from £5,000 to £2,000. Dividend income received above £2,000 will be taxed at 7.5% if you are a basic-rate taxpayer, 32.5% if you are a higher-rate taxpayer and 38.1% if you are an additional rate taxpayer.

Junior ISA allowance:

Whilst the main ISA allowance will remain at £20,000, the Junior ISA allowance will rise from £4,128 to £4,260. Any child under the age of 16 can have a Junior ISA but the money paid in cannot be withdrawn until the child turns 18.

Inherited ISA allowance:

At present, savers can pass on the full value of their ISA to their partner, using the additional permitted subscription (APS) system. This means that the money in the ISA at the time of death is added to the surviving partner’s ISA allowance. However, any growth in the ISA between the date of death and the formal closure of the estate, which can take several months, is subject to tax. But from April 2018 any growth in the ISA can be transferred tax-free.

Help to Buy/Lifetime transfer deadline:

Until April, savers can transfer funds invested in their Help to Buy ISA before April 2017 (when the LISA launched) into a LISA without it counting towards their £4,000 LISA allowance.

If savers have contributed the maximum to a Help to Buy ISA between December 2015 and April 2017 they would have £4,400 saved. If they then transfer that into a LISA before April next year it will not use any of their allowance for the year. This means they could contribute a further £4,000. As a result, in April they would get the 25% bonus on the entire £8,400, which is £2,100.

Personal allowance:

The amount of money you can earn before you start paying income tax will rise in April from £11,500 to £11,850.

Marriage allowance:

The marriage allowance is increasing by £35 to £1,185 in April. The allowance allows you to transfer £1,185 of your personal allowance to your spouse if they earn more than you.  You must have an income of less than £11,850 a year and your spouse must earn less than £45,000.

National Living Wage:

From April, the National Living Wage, the minimum paid to employees aged over 25, will rise from £7.50 an hour to £7.83. This equates to a £600 annual pay rise for full-time workers on basic pay.

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