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A new tax year has begun, bringing a range of fresh allowances for your savings, investments and pensions.

This is the start of the financial year “when time runs out on certain reliefs and allowances”, said Investors’ Chronicle, as the state’s requirements for funding continue to rise. 

There are “various tax changes”, said Which? that will affect your money and ultimately how wealthy you feel.

Here is what you need to know.

National Insurance tax cut

National Insurance (NI) is used to help fund the state pension and public services such as the NHS. 

It is charged on earnings above £12,570, and Chancellor Jeremy Hunt “pulled a rabbit out of the hat” in last November’s Autumn Statement, said Which?, when he reduced the NI rate from 12% to 10%.

Hunt then used his Spring Budget to cut it again to 8% from the new tax year, from 6 April.

The Treasury said this move would save an employee on an average £35,000 salary £450 per year.

It means many workers may have already noticed “more money in their payslips this year”, said The Times Money Mentor.

But there are warnings that freezes and reductions in other tax thresholds “mean the amount people pay overall is rising”, said BBC News.

Reduced tax allowances

The amount investors can earn without paying capital gains tax when selling an asset and the dividend allowance from shares have also been reduced.

The capital gains allowance has been cut from £6,000 to £3,000 after already falling from £12,300 in the previous tax year, while the dividend allowance has halved to £500. 

This creates the “prospect of paying more in tax, sooner” on your income, explained LondonLovesBusiness.

New ISA rules

There is a £20,000 allowance that you can pay into an ISA and earn returns tax-free this financial year.

The ISA rules have changed for the new tax year, and savers can now open more than one new cash and/or stocks and shares ISA rather than only having one.

The hope is that this will “trigger more competition” among providers to offer better rates for savers, said ThisIsMoney.

But the change is “not mandatory”, added MoneyWeek, and many ISA providers are not ready for the reforms, so you will need to check whether your provider offers this service.

Pension reforms

Pension investors are set to benefit from the removal of the lifetime allowance on savings.

Previously, there was a £1,073,100 limit on how much could be put into a pension over an investor’s lifetime.

This has been scrapped though, said Fidelity, which will “boost the tax-efficiency of pension savings”. 

There is still a £60,000 annual contribution limit on pensions.

But there is also a “sting in the tail”, said St James’s Place as the government has capped how much can be taken tax-free from a pension pot at 25% or £268,275, whichever is lower.

Child benefit boost

Parents are set for a boost as child benefit rates have increased by 10.1% to £25.60 a week for the eldest child and £16.95 a week for other children.

Meanwhile, the threshold for the high-income child benefit charge – a tax on the payments for higher earners – has been increased from £50,000 to £60,000, so “several hundred thousand families are to be better off”, said The Guardian.

The risk of fiscal drag

Despite some of these changes, “you may still be paying more tax overall”, due to fiscal drag, said MoneyWeek. 

This is because the thresholds at which basic and higher-rate taxes are charged have been frozen, which, said The Times Money Mentor, “will force millions of people to pay more tax as their earnings rise and take them into a higher tax band”.

Fiscal drag is a “stealth tax”, said the London School of Economics, as it represents “increases in the tax burden that the public either ignores or of which it is unaware”.

Not much can be done about tax thresholds, said the Daily Telegraph, “but you can try to make use of allowances as much as you can”. 

This means taking advantage of available tax-free allowances such as ISAs and pensions to shelter more money from the taxman.