A new year brings with it a raft of changes to your personal finances, so what has 2020 got in store for your money and will it make you richer or poorer?

1. Inheritance tax breaks get more generous

From April 2020 everyone will be able to leave more money as part of their estate before they have to pay inheritance tax. New rules in April 2017 saw anyone with residential property given an extra inheritance tax-free allowance, called the residence nil rate band, and the limit has gradually been increasing each year. From April 2020 it will go up one final time to £175,000 per person.

This means that including the standard nil rate band of £325,000 per person, a couple can leave a property worth £1m entirely inheritance tax free. The property must be left to a child, grandchild, or step versions. Those with very large estates won’t get the full amount, as anyone with an estate valued at more than £2m will lose the allowance by £1 for every £2 they are over this limit.

2. Rail fares increase by 2.7% in January

Commuters have already seen another hike in their train costs, as rail fares went up by 2.7% at the start of January 2020. The increase is far ahead of the current CPI measure of inflation, which was 1.5% in November. Someone commuting from Tunbridge Wells to London including tube travel will now pay £5,664 a year while a season ticket from St Albans to London, with a travelcard, will rise to £4,664.

You could make use of your employer’s season ticket loan scheme to cut the cost. Alternatively, put the season ticket on a 0% interest credit card to spread the cost across 12 months, meaning you don’t have to start the new year by forking out thousands of pounds in one go.

3. Broadband prices get cheaper

Ofcom has intervened to get a better deal for those who don’t shop around for broadband. Providers have pledged to cap rates for those out of contract and stop preferential rates being offered to just new customers.

What you’ll be offered depends on your provider, but will all be in place by March 2020. After February, providers will also have to warn customers if they are out of contract. While these changes will save you money, you’ll still save more by switching to a better deal once your contract ends. Or if that’s too much hassle then call your current provider and haggle over the cost.

4. Overdraft fees will be easier to understand

From April banks won’t be able to charge more for unauthorised overdrafts than for arranged ones, which is good news for anyone who accidentally slips into the red.

The regulator has brought in the changes after discovering that in some cases overdraft fees can be 10 times higher than payday loans.

Banks will have to make their fees clearer, putting them in one annual interest rate, and won’t be able to charge fixed fees, per day or month, for going into your overdraft. The Financial Conduct Authority thinks the move will mean that someone with £100 in an unarranged overdraft will go from paying £5 a day to just 20p a day.

If you are in your overdraft you should check how much you’re being charged and see if there is cheaper credit available.

5. Landlords face more tax hikes

Landlords will see another hike in taxes from April 2020, as tax breaks are ratcheted down again. The Government has gradually been reducing the amount of mortgage interest landlords can use to offset against their income over a four-year period, and this year is the final year.

It was cut in 2019 so that only 25% of their mortgage costs could be set again profits, but that falls again in April so that none of the costs can be offset. Instead buy-to-let investors will get a basic rate tax relief reduction at 20%.

The move only affects higher or additional-rate taxpayers, although the move itself will push some landlords from the basic-rate tax bracket into the higher-rate bracket. As an example, a higher-rate taxpayer landlord who gets £1,000 a month in rent and has mortgage costs of £600 a month would have paid £1,920 in tax pre-2017, but will now pay £3,360 in tax from April.

6. Student loan repayments fall

Graduates will get a small boost from April, as the amount you can earn before starting to repay your student loan will increase from £25,725 to £26,575, a rise of 3.3%.

For those over this limit, you repay your loan at a rate of 9% above this figure. Meanwhile those on a Plan 1 loan – so those who went to university between 1998 and 2011 – will see their threshold rise from £18,935 a year to £19,390.

7. Second homeowners face higher taxes

Anyone who has rented out their home after moving out, rather than selling it immediately, will face a higher tax hit next year. The Government has made three big changes to how the tax works when you come to sell this property.

Firstly, many sellers will lose the ‘lettings relief’ tax break, affecting how much capital gains tax you pay when you sell the property. Currently you get capital gains tax relief up to £40,000 per person (so £80,000 per couple) if you let out a property that was your home, but from April 2020 this relief will only apply to landlords who are actually living in the property with their tenants.

The next big change is to private residence relief, which currently means that any increase in the property’s value during the final 18 months that you own a property is not counted for capital gains tax purposes. However, from April that will be limited to nine months.

The third change is that you will have to pay up for any capital gains tax you owe much more rapidly. Currently you just have to pay this bill by the end of the January in the following tax year, but from April you have just 30 days to pay the tax due on any gains from the sale of UK residential property.

There’s little landlords can do about these changes, other than be aware of them. The changes apply to sales after April 2020, so if you’re currently selling your property or planning to early next year, you might want to think about completing before the deadline.

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