As we move from the 2023/24 tax year into the 2024/25 tax year, I am trying not to think about filing personal tax returns again (I have only just gotten over last year’s tax season!).
But there are some changes taking place in this new tax year that I would like to make you aware of:
- National Insurance
The self-employed will enjoy a reduction in class 4 NI and the need to pay class 2 will be abolished.
- Dividends
Most dividends rates and thresholds will stay the same, but the tax-free allowance will reduce to £500.
- Capital Gains Tax
The allowance from capital gains will be reduced from £6,000 to £3,000, costing you up to £600 on gains over £12,300 depending on your tax rate.
Currently, CGT is applied at 28% on second homes or buy-to-lets for higher-rate taxpayers, but from 6 April 2024, that rate will fall to 24%. The basic rate for CGT on residential properties remains unaffected at 18%.
- The VAT Threshold
The VAT threshold will increase to £90,000 which may help a few businesses, but most won’t notice the difference.
- National Minimum Wage
NMW will increase to £11.44 an hour for anyone aged 21 or over.
- The Pension Lifetime Allowance
The limit on the amount you can pay into your pension in total has been removed.
- State pension will increase
The full new state pension will rise to £221.20 a week, from £203.85. This adds up to £11,502 a year, compared to the current £10,600.
- Child benefit is being extended and increased
The rules around child benefit will change from 6 April, meaning a parent earning between £50,000 and £80,000 will receive some, or all of, the benefit.
Do you win or lose with the changes?
Fortunately, you do not need to understand these changes in detail – we will continue to calculate the tax you need to pay and steer you through the changes.
But will you be better off? According to analysis, people earning more than £131,000, or between £32,000 and £55,000, will win from the government’s tax changes, but everyone else is paying more.
