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How your pay and benefits are changing in the new financial year

You’ll get to keep more of your wages from this week, but could lose out if you are getting certain benefits.

There’s a host of changes coming in as part of the new financial year, and we’re covering a different topic each day on the Your Money Advice blog. Here’s what you need to know about changes to your earnings or benefits.

Your pay

National Living Wage

The National Living Wage for those over 25 years old has increased to £7.50 an hour, up by around 4%.

The National Minimum Wage for those between 21 and 24 has gone up to £7.05. The rate for 18-20 year olds is £5.60 an hour, for 16-17 year olds it’s £4.05 and apprentices under 19 or in the first year of their apprenticeship now get at least £3.50.

Income tax thresholds

You’ll be able to earn £500 more before you start to pay income tax, as the threshold at which you start paying it goes up from £11,000 to £11,500 a year.This’ll give you an extra £100 to take home in your pay packet.

The amount you can earn before 40% tax kicks in also increases. Now it’s only earnings above £45,000 a year that’ll get taxed at the higher rate, potentially giving you an extra £400 a year.

However, in Scotland the higher rate level remains at £43,000.

Your benefits

Freeze on benefits payments

For the second year many working-age benefits payments will stay the same. This means they won’t go up, effectively reducing how you can afford to spend since inflation is currently at 2.3%. The freeze will last for another two years.

Universal Credit

Anyone on Universal Credit (UC) and working will be able to keep slightly more of their earnings. The UC taper rate, which gradually reduces the amount of UC you get as your earnings increase, goes up by 2p. This means you can keep 37p for every £1 you earn, rather than 35p.

Child Tax Credit

Parents won’t be able to claim the family element of Child Tax Credit if your first child is born after 6 April 2017. This could be worth £545 a year.

You also won’t get any more Child Tax Credit if you have a third child from Thursday as it’s now only paid on the first two children in any family.

This won’t affect you if you’re already claiming for more than two kids. However, if you stop receiving Tax Credits for more than six months and apply again, you’ll only be able to claim for two children.

There are some exceptions to this rule. If you have multiple births such as twins or triplets, you’ll be able to claim for all the children.

Housing Benefit

As of 1 April, young people aged between 18-21 on Jobseeker’s Allowance won’t be able to claim Housing Benefit.

There will be a few exceptions, including young parents with dependent children, some disability benefit claimants and apprentices.

Employment and Support Allowance (ESA)

Anyone making a new claim for ESA and put in or moved to the Work Related Activity Group (WRAG), will get £29.05 less a week as they are no longer entitled to claim this payment. This includes anyone who stops claiming for 12 weeks or more and is reapplying. The payment of £73.10 will be the same as Jobseeker’s Allowance.

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