The first day of a new tax year is the moment when many previously announced tax changes actually start to bite.
But many people who have not been keeping a close eye on recent Budget announcements may be unaware of what is in store for them.
Here Times Money offers a guide to the tax changes taking effect today.
Q: What is happening on income tax?
A: The personal allowance - the amount people can earn before they start paying tax - will rise by £1,000 to £7,475. This measure will hand about £200 to 23 million basic rate taxpayers and take more than half a million out of tax altogether.
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Q: So that’s good news?
A: Yes it is, but there are other tax changes which are not good news. For example the threshold at which people start paying higher rate tax will today come down from £43,875 to £42,475. This will mean that an additional 750,000 people will be paying higher rate tax.
Q: Any other bad news?
A: There will be an increase in standard national insurance contributions (Nics) for employees and employers of one percentage point from 11 per cent to 12 per cent, plus a one percentage point increase for employees paying the higher rate. This increase will be mitigated at the bottom end of the scale, as the amount people can earn before they have to start paying Nics will rise from £110 to £139 per week. However, anyone earning more than about £20,000 will pay more NI from today.
Q: I earn £35,000 a year. What will be the combined effect of these changes to NI and the tax thresholds?
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A: Stephen Herring, of BDO, the accountant, says you will gain £200 from the increase in the personal allowance but you will lose £278 from the NI changes, so overall you will be £78 worse off.
Q: What’s happening to child benefit?
A: It will be frozen at its current level for three years. Child benefit is worth £20.30 a week for the eldest child and £13.40 a week for each other child and isn’t taxed. It is paid directly to the parent responsible for care of the child, usually the mother.
Q: How about other benefits?
A: Most benefits, the child tax credit and public sector pensions will be increased in line with the consumer prices Index (CPI), rather than the typically more generous retail prices index (RPI). From next April the same CPI indexation will apply to all tax and NI allowances.
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Q: What’s happening on tax credits?
A: Quite a lot and most of it is bad news. The baby element of the child tax credit, worth £545 a year for families with a child under one, is being withdrawn. The proportion of childcare costs that are covered by the childcare element of the working tax credit is being cut from 80 per cent to 70 per cent.
Fiona Weir, chief executive of the single-parent charity Gingerbread, says: “The changes mean a single parent in London who is working 21 hours a week with a three-year-old child in nursery will have to find an additional £505 a year out of their earnings to spend on the childcare costs.”
The working tax credit itself will be frozen for three years.
From today families with household income above £40,000 will start to have the family element of the tax credit tapered away. Up to now the taper started to kick in only at £50,000. The one positive point is that the child element of the tax credit is being raised to £2,555 - much more than the rise in inflation.
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The Government’s own figures show that the increase in the child element will cost the exchequer £560 million a year by 2014. The other measures will save the Government £1.4 billion, meaning many tax credit claimants will be significantly worse off.