Why financial life might get easier for some UK consumers in April : Sarah Coles

Alongside this, 29 million workers stand to benefit from the National Insurance cut on 1 April, when the main rate for employees drops from 10% to 8%. The government estimates that when added to the cut in January, the cuts will save the average worker £900 a year.

However, this isn’t the full picture, because we need to see this in the context of frozen income tax thresholds. When you take these into account too, anyone earning over £60,000 will be worse off. This is partly because they may have been pushed into paying a higher rate of tax. However, it’s also due to the fact that the chunk of their income over £50,270 is subject to a different band of National Insurance, which hasn’t been cut. Over time, as the frozen tax thresholds bite, more higher earners will suffer, so by the end of the freeze, anyone making over £55,000 will be worse off.

If you’re in this position, you can lower your tax bill by considering pension contributions. This won’t leave you any better off when it comes to take-home pay, but means you will be putting more aside for your future, instead of losing it to tax.

At the other end of the spectrum, lower earners are also worse off, because more of them have been pushed into paying income tax – and more of it. Meanwhile, they pay less National Insurance, so they benefit less from the cut. In the coming tax year, anyone making less than £26,000 will be worse off, and by the end of the freeze, anyone on less than £32,000 will be worse off.

This leaves middle earners - earning between £26,000 and £60,000 - better off. However, by the end of the freeze, the band of winners will narrow to just those earning between £32,000 and £55,000.

Pensioners also face higher tax bills. They’ve been dragged into paying more income tax by frozen tax thresholds, and increasingly even those with very modest pension savings are finding themselves paying tax. Meanwhile, because you don’t pay National Insurance over state pension age, pensioners don’t benefit from the cut.

However, overall, typical pensioners will be better off after April, thanks to an 8.5% increase in the state pension. The bigger the role of the state pension in your income, the more impact the rise will have. And while frozen tax thresholds will eat some of this gain, pensioners with a household income under £80,000 will be better off. This doesn’t mean state pensioners are rolling in it, because they’re playing catch up after a year of fixed incomes being battered by inflation, but after a really tough period, this rise will bring some relief.

Parents are set for some good news too, as the free childcare announced in the Autumn Statement last year starts rolling out. From April 6, working parents of two-year-olds will get 15 hours of free childcare a week. With the average cost of 25 hours of childcare a week at £152, this represents a step-change in household costs. However, it isn’t entirely straightforward, because you need to calculate how this impacts you. If you need care beyond the school year, this works out at 11 hours a week, and nurseries may set boundaries on how you can use those hours, so there’s likely to be additional payments to cover on top.

Meanwhile, higher earning parents, making between £50,000 and £80,000, will also benefit from the change to the high income child benefit charge. At the moment, when a parent earns over £50,000, they have to start repaying the benefit – and they’ll lose it all once they make £60,000. From the new tax year, they only start losing the benefit at £60,000 and they lose it at half the pace, so they pay it all back when they make £80,000. It will take 170,000 families out of paying this charge, and overall half a million families with children will save an average of £1,300 a year.

There’s some good news for ISA investors too. Not only do tax-free savings and investments become more rewarding at a time when taxes are more punishing, but also April 6 will see some tweaks to the system. You will be able to pay into multiple ISAs of the same kind in a single tax year from April. Meanwhile, within IFISAs you may also be able to access Long Term Asset Funds and open ended property funds.

However, there’s a sting in the tail for investors who invest outside an ISA, because the dividend tax allowance falls in April from £1,000 to £500 and the capital gains tax annual allowance is slashed from £6,000 to £3,000. Investors can protect themselves from both by selling assets and making gains within their capital gains tax allowance this year (£6,000), and then using the bed and ISA process to move up to £20,000 into an ISA.

There’s also a raft of rising costs that will affect most of us. On 1 April, councils have the freedom to raise tax by 3% - plus another 2% for social care – without holding a referendum. It means band D council tax could rise from an average of £2,065 to as much as £2,168 - £103 more. The standard car tax charge will rise with RPI of 10.1% - from £165 to £180. The standard colour TV licence will cost £169.50 – up from £159, and air passenger duty will rise for most bands. Meanwhile, water bills are set to rise 6% in England and Wales – up £27 and 8.8% in Scotland, or £36. Plus mid-contract hikes are on the way for the customers of a number of broadband and mobile companies. So your prices could rise by around 8%.

It means some households will be under pressure across the board, while others face a mixed bag when it comes to taxes and price rises. And while this may not qualify as an awful April – it’s a stretch to imagine it’s much more than a bearable one.

Falling inflation bodes well for savers

The inflationary squeeze has finally eased a little, hitting 3.4% in February. It hasn’t let go entirely, because after hitting the target, inflation is expected to take hold again, which is why the Bank of England is in no hurry to cut rates. The combination of the two is great news for savers. With inflation at 3.4%, and savings and cash ISA rates as high as 5% you can beat inflation by quite some margin. The rates on one-year fixed term deposits have risen the most over the past four weeks. They also lock in rates before the market starts to reprice. So if you don’t need a chunk of your savings for a year or longer, it’s worth considering a fixed rate deal right now.