Key Tax Changes for the 24/25 Tax Year

Published: 11/04/2024 By Hannah Duncan

As we usher in the new tax year, several significant changes have taken effect, impacting individuals and businesses alike. Here's a simplified breakdown of what you need to know:

1. Dividend Allowance Reduced: The dividend allowance has been slashed from £1,000 to £500.
2. Capital Gains Tax Exemption Halved: The annual exempt allowance for capital gains tax (CGT) has been halved from £6,000 to £3,000. Just two years ago, it stood at £12,300, indicating a significant reduction.

3. New CGT Rate for Property Sales: A reduced CGT rate of 24% will now apply to residential property sales, down from the usual 28% for higher rate taxpayers. The standard 18% rate remains unchanged.

4. Lower Employee National Insurance Contributions (NICs): The rate of employee NICs has been further reduced by 2% to 8%, marking the second reduction since January. This will save the average worker earning £35,400 over £900 annually.

5. Frozen Tax Thresholds: Despite the cuts in NICs, basic rate and higher rate tax thresholds remain frozen until 2028 at £12,570 and £50,271 respectively. This freeze is expected to push over a million taxpayers into higher rate tax, with no changes to the additional 45% threshold at £125,140.

6. Lower Self-employed Class 4 NICs: The main rate of Class 4 NIC has been cut to 6% down from 9%, as well as the ending of the need to pay Class 2 NICs.

7. High Income Child Benefit Charge (HICBC) Increased: The threshold has been raised to £60,000 from £50,000, with a tapered charge for incomes between £60,000 and £80,000. Child benefit rates have also increased, which will provide additional support to families. The eldest child now receives £25.60 per week, whilst all other children receive £16.95 each.

8. State Pension and Working Tax Credit Adjustments: The state pension is increasing to £221.20 a week, while the basic element of working tax credit rises from £2,280 to £2,435.

9. Changes to Private Pensions: New lump sum and death benefit allowances have been introduced, with there no longer being a lifetime allowance.
10. ATED Charges Rise: The annual tax on enveloped dwellings (ATED) has seen a 6.7% increase from April 1, 2024, in line with the September 2023 CPI.