New tax legislation is introduced

A plethora of changes to tax legislation and benefits have now come into effect, marking the beginning of the new tax year.

The reforms include increased benefits for pensioners; the state pension has risen by 5% to £95.25 a week, while pension credit has climbed from £124 to £130 a week for individuals and from £189 to £198 for couples.

6 April also saw changes to personal allowances, with the amount at which income tax is payable increasing by £440 to £6,475 for those aged under 65. The Treasury claims the revision will benefit 22 million basic rate taxpayers.

However, the news is not as good for higher rate taxpayers. National Insurance is now payable at 11% on the first £43,875 and 1% after that, up from £40,400.

Some of the other changes which came into effect on Monday include:

• Increased child tax credits – up from £2,085 to £2,235
• A higher inheritance tax threshold – now £325,000
• New flexible working rights for parents of children under 16.

Meanwhile, some experts have warned that the Chancellor will be forced to raise taxes in his forthcoming Budget after the Treasury admitted it underestimated the severity of the recession.

According to the Institute for Fiscal Studies, the UK’s deficit is about 2.7% more than Alistair Darling forecast in his Pre-Budget Report last year. Consequently the Chancellor may be forced to add an extra £500 to the average taxpayer’s bill to plug the multi-billion pound deficit in the public finances, analysts said.