Archive: MoneySavingExpert's Money Tips Email

10 (Happy) New Tax Year must-dos, incl...

Claim TWO years' tax breaks for working from home, find your new take-home pay, ISAs vs savings & more

Big Ben isn't chiming, fireworks aren't fizzing, but financially the 6 April new tax year is a key date. Tax allowances change, benefit and state pension payouts go up, and more. This means you should take action and make some important resolutions. Here's our new 2021/22 tax year checklist to get you started...

1. STOP PRESS: Need to work from home, even for a day? We've just had it confirmed you can claim tax relief for ALL of 2021/22 (as well as the last tax year). We spotted HMRC had updated its site late on Tue to make this possible, and after pushing, we got official confirmation from it just minutes before we sent this email (so we speedily wrote this, and delayed the send a few minutes). Essentially, if your employer requires you to work from home, even for a day, you are eligible for a whole year's worth of tax relief. This is a special pandemic rule that was introduced for the 2020/21 tax year (which ended on Mon) but has been extended for 2021/22.
   
   Over 2m claimed it for last year (if you haven't, you still can), likely as Martin shouted it from the rooftops, both here and on his show. If you're eligible for both years, the total gain is up to £250. Full help, pros, cons and who's eligible in Martin's Working-from-home tax back blog.
   
   
2. New. Income Tax Calculator 2021/22 - find your NEW take-home pay. We've updated our Income Tax Calc to include the new allowances for this year. Pop in your details and it'll tell you what'll be in your April pay packet and beyond.
   
   
3. Cash ISA allowances have reset - but most can earn more tax-free in a normal savings account (eg, 1.25% easy access). Cash ISAs are just savings accounts where the interest is never taxed, and you can save up to £20,000 in one this tax year. Yet as fewer than 5% of people pay tax on savings interest anyway, what matters for most is the rate. And top normal savings currently beat ISAs...
   
   With NORMAL accounts, for easy access, Marcus* and Saga* pay the top 0.4% AER variable rate (min £1). Or newbies to autosaving app Chip who apply by 11.59pm on Thu can get 1.25% easy access on a max £10k (+ up to £25 cashback) via a special MSE code, if they do some legwork. The top 1yr fix is from Ahli United Bank at 0.65% AER (min £1k), though it's only available via 'savings marketplace' Raisin. If new to Raisin, some can also claim £5-£50 cashback. More help and deals in Top Savings.
   
   For comparison, the top CASH ISAs can't beat the deals above and even when neck and neck, they've more restrictions. For easy access, Charter Savings pays 0.4% AER variable but only on a min £5,000. Paragon Bank also offers that rate on a min £1 but you're limited to three withdrawals a year. The top 1yr fix is 0.45% AER from Yorkshire BS (min £100) and Paragon Bank* (min £500). More help and deals in Top Cash ISAs.
   
   
4. Check your new and old tax codes via our free tool - it's your responsibility to ensure they're correct. A wrong one can cost you £1,000s. A tax code is a series of letters and numbers, eg, 1257L, which tells your employer or pension provider what tax to deduct. 
   
   All 13 million 2021/22 code notifications have been sent so should have dropped on to doormats or into inboxes by now. However, millions of current and past years' codes are wrong. So you could have overpaid and be due money back, or you could be underpaying and may owe tax (which you legally must pay). Use our Free Tax Code Calc to check this year's code and those going back four more tax years. 
   
   Charlie emailed: "After reading your article on checking your tax code, I phoned the tax office and got a £567 rebate and my tax code changed - a huge difference. Thank you, Martin."
   
   
5. Want to invest? Stocks & shares ISAs are a clearer-cut decision and the same 2021/22 ISA allowance as for cash applies. The £20,000 ISA allowance for this tax year applies across cash AND stocks & shares, meaning you can save in one, both or neither. While it's questionable with cash savings whether or not to go for an ISA, using one is a no-brainer for most when it comes to investing. Full help in our Stocks & Shares ISAs guide.
   
   
6. Pension credit payouts are up - but 1 million households fail to claim this benefit worth £1,000s. Check NOW. If you're over state pension age and earn less than £177.10/wk as a single person or £270.30/wk as a couple - from work, pensions or savings - then the main element of pension credit tops up your income to those amounts. Plus you can earn more via the 'savings credit' element.
   
   Aside from the payout - worth an avg £3,000/yr - pension credit may also entitle you to a host of discounts such as cheaper council tax or a free TV licence for over-75s.
   
   Yet a staggering number don't claim, so make the new tax year your trigger to check for yourself or for a friend/loved one, in case they could claim too - as many who could get it won't see this. See Pension Credit help. Janet emailed: "I applied and got £100+/wk and reduced council tax, TV licence, water rates and more. I'd say to anyone, apply - you never know." 
   
   Related: The full state pension for those who retired after 5 April 2016 rises this month from £175.20/wk to £179.60/wk. For those who retired earlier, the full basic state pension rises from £134.25/wk to £137.60/wk.
   
   
7. Universal credit and other benefit rates have risen - check NOW what you can get as millions miss out. It's not just pension credit that vast swathes of people miss out on, as over recent years a whopping £15 billion in means-tested benefits has gone unclaimed.
   
   The financial effect of the pandemic sadly means many more are now eligible to claim - some with family income up to £73,000/yr are entitled. Try our 10-min Benefits Calculator to see if you're one of them.
   
   Pamela emailed: "I used your calculator which said we were entitled to a council tax discount so we applied to our council and three weeks later received a £268 refund and we've a £979 annual discount against future bills. Result - thank you."
   
   
8. Start the new tax year as you mean to go on - apply for the marriage tax allowance NOW and you could claim back up to £1,220. If you qualify for the Govt's marriage tax allowance, once you sign up, you get it every year. To be eligible...
   
   - You must be married or in a civil partnership (cohabiting doesn't count).
   - One must be a non-taxpayer, the other a basic 20% taxpayer.
   
   The non-taxpayer can transfer 10% of their tax-free allowance, currently £1,260, to their spouse so they pay £252 less tax. Backdate it the full four years, and in addition to the current tax year it can be worth up to £1,220. While there's no urgent deadline, do it now while you remember.
   
   Full help in our Marriage Tax Allowance guide. For most it's simple and quick, as Laura emailed only last week: "Thanks to your page I applied. A week later my husband received a cheque for £947. We're so grateful."
   
   
9. Aged 18-39 and planning to buy a first home? You've a new £4,000 Lifetime ISA allowance. A LISA gives first-time buyers using it towards a home a 25% bonus (up to £1,000/yr) on everything they save in it. You can put in up to £4,000/tax year. Read our Top LISAs guide for full help (incl info on the LISA's other use - for retirement savings).
   
   

10. A warning to all paid without tax deducted - a third of that cash probably isn't yours so don't spend it. This mainly affects freelancers and the self-employed, and while we know it's been a tough year for many, plenty still have income. Yet the psychology of how tax works can cause financial havoc so it's crucial to get it right at the start of the year.
    
    If you pay basic-rate tax, then for every £100 you're paid, about £30 probably isn't yours as you'll need it to pay tax. Of course, you may need to alter the amount if you're not a basic-rate taxpayer, you've complex finances or you've business expenses (as you're taxed on profit, not income).
    
    You can use our Income Tax Calc for a rough guide of what tax you'll pay, although it's mainly set up for the employed, and as you pay different national insurance if you're self-employed, it won't be exact. Then EVERY time you're paid, siphon off the tax cash into a separate savings account (see top rates above) and don't spend it.