Tax changes for the 2024/2025 tax year

A string of changes for businesses and individuals are now in force and it is vital to consider how they will impact you and your business when it comes to your financial planning for the new fiscal year.

What changes could impact you and your business?

National Insurance Contributions (NIC) – A further 2% cut to employee and self-employed NICs will benefit many individuals, however, there is no such reduction for employer contributions. Similarly, the above-inflation hike to the hourly rate of pay for the National Minimum Wage and National Living Wage, will mean many workers see an increase in their take home pay. For businesses though, this is an added cost to factor in.

Child Benefit High Income Charge threshold - The £50,000 threshold has increased to £60,000 for the new tax year and the alternation in the charge rates, from 1% for every £100 over the threshold to 1% for every £200, now means Child Benefit will not be fully withdrawn until an individual's earnings exceed £80,000, benefiting hundreds of thousands of families.

Dividend allowance – If you are a company owner/ shareholder and are remunerated by way of dividend, the amount of dividend income you can receive this year before paying tax is being halved again to £500. Last April this was cut from £2,000 to £1,000. This may mean the decision about what business structure is appropriate (sole trader/partnership/LLP or limited company), now needs further detailed consideration. The rate of class 4 NIC and income tax at the lower rates, when matched with corporate tax rates and dividend taxes at 8.75%, does mean that at certain levels of income different structures are more beneficial.

Capital Gains Tax (CGT) – In April 2023 the CGT allowance was cut from £12,000 to £6,000 and for the 2024/2025 tax year it has been halved again to £3,000, meanwhile, the rate of CGT for higher rate taxpayers will reduce from 28% to 24%, for basic rate taxpayers it remains at 18%. Those with capital gains exceeding the new threshold will have an increased tax liability and may need to strategically consider the timing of asset disposals to optimise their tax position and assess the impact of CGT on investment decisions.

By taking note of the changes above and adapting accordingly you can optimise your financial outcomes.