Preparing for the 2024/25 Tax year: key changes and considerations

With the end of the 2023/24 tax year approaching on 5 April 2024, businesses and individuals need to be aware of the upcoming changes and measures set to take effect in the 2024/25 tax year. Paul Harris, Private Client Tax Partner, outlines the significant developments that you can expect from April 2024, helping you stay informed and prepared for the new tax year.

NICs Changes

The 2023 Autumn Statement by Chancellor Jeremy Hunt brought significant changes to the National Insurance Contributions (NICs) system. On 6 January 2024, the main rate of Class 1 employee NICs decreased from 12% to 10%. This reduction provides tax relief to approximately 27 million working individuals, with the average worker earning £35,400 benefiting from a tax cut exceeding £450 in 2024/25.

Class 2 NICs for self-employed workers with profits exceeding £12,570 was also scrapped. This means that those affected individuals still retain access to contributory benefits like the State Pension. Those with profits between £6,725 and £12,570 will receive National Insurance credits without having to pay NICs, while those with profits under £6,725 and voluntary Class 2 NICs contributors maintain their access to contributory benefits.

Furthermore, from 6 April 2024, the main rate of Class 4 self-employed NICs will decrease from 9% to 8%, benefiting approximately two million self-employed individuals.

Dividend Allowance Reduction

Although the tax rates on dividend income remain unchanged, the Dividend Allowance will decrease from £1,000 to £500 starting on 6 April 2024. This reduction will affect approximately 4.4 million individuals in 2024/25, with an average loss of around £155. So, make sure you make use of your £1,000 dividend if you have not already before 6 April.

ISA Limits Freeze

For the 2024/25 tax year, the limits on Individual Savings Accounts (ISAs), including Junior ISAs, Lifetime ISAs, and Child Trust Funds (CTFs), will be frozen. However, new changes effective from April 2024 will allow multiple subscriptions to ISAs of the same type every year and permit partial transfers of ISA funds in-year between providers.

Merging R&D and SME Schemes

The government has announced the merging of the Research and Development Expenditure Credit (RDEC) and SME schemes, with expenditure incurred in accounting periods beginning on or after 1 April 2024 being claimed under the merged scheme. HMRC are cracking down on disingenuous claims so make sure you reach out to a reputable R&D tax specialist to help create and submit your claim.

Abolishing the Pensions Lifetime Allowance

From 2024/25, the pensions Lifetime Allowance will be abolished. Changes will be made to clarify the taxation of lump sums, lump sum death benefits, and the application of protections. Additionally, overseas pensions, transitional arrangements, and reporting requirements will see changes.

Business Rates Changes in England

Starting from 1 April 2024, the small business multiplier will remain frozen for another year in England. The 75% Retail, Hospitality, and Leisure relief will be extended for 2024/25, and the standard multiplier will be updated in line with September’s Consumer Prices Index.

National Living Wage and National Minimum Wage

The government has accepted the recommendations of the Low Pay Commission, leading to increased rates of the National Living Wage (NLW) and the National Minimum Wage (NMW) effective from 1 April 2024. Furthermore, the NLW will be extended to 21 and 22-year-olds from this date.

Here are the rates applicable from 1 April 2024:

The apprenticeship rate applies to apprentices under 19 or 19 and over in the first year of apprenticeship. 

Staying informed about these tax changes and adjustments is crucial for making informed financial decisions in the 2024/25 tax year. If you have any questions or need personalised tax advice, please don’t hesitate to reach out to Paul Harris or a member of our Private Client team. Get in touch by calling 0330 058 6559 or emailing hello@scruttonbland.co.uk