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What’s changing in the 2024/25 Tax Year?

As the 2024/25 UK tax year has now begun, it’s pivotal for both individuals and businesses to stay up to date with the latest alterations in tax regulations. Let’s get into the significant changes that could impact your financial strategies and responsibilities:

National Insurance (NI) adjustments:

In a bid to alleviate the tax burden for 29 million workers, effective from 6th April 2024, the rate of employee National Insurance has been slashed by 2 percentage points, going from 10% to 8%, aiming to inject more liquidity into the pockets of diligent individuals.

For the self-employed worker, the principal rate of self-employed National Insurance has also witnessed a substantial reduction, by an additional 2 percentage points, bringing the new rate down to 6% (formerly 9%), resulting in an average annual saving of £650 for a self-employed worker earning approximately £28,000, thanks to the combined impact of this reduction and the abolition of Class 2 contributions.

Overhaul in High Income Child Benefit Charge (HICBC):

The HICBC, applicable to higher earners receiving Child Benefit or having a partner who does, underwent revisions starting April 2024, with the income threshold for the charge increasing from £50,000 to £60,000.

Moreover, the rate at which the HICBC is levied has been halved, now standing at 1% for every £200 earned above the threshold. Consequently, Child Benefit will not be fully withdrawn until individuals earn £80,000 or above.

An estimated 485,000 hardworking families stand to benefit, receiving an average of £1,260 to support the costs of raising their children, while 170,000 families will be entirely exempt from this tax charge.

Reduction in Capital Gains Tax (CGT):

The higher rate of CGT applicable to property transactions (currently 28% for second homes or buy-to-lets) will witness a decrease to 24% starting from 6th April 2024.

Basis Period Reform:

Commencing from the tax year 2024-25, profit or loss calculations will adhere to a tax year basis, meaning a business’s profit or loss will be determined based on actual income or loss during that year, no matter its accounting date. This reform eradicates basis period rules and discontinues further overlap relief.

Income Tax Thresholds and Allowances:

Personal Allowance remains static at £12,570 for the 2024/25 tax year, projected to remain frozen until 2028. The Higher Rate Threshold remains unchanged at £50,270 for the same period, also expected to be frozen until 2028. The Additional Rate Threshold stays consistent at £125,140.

As usual Focused will follow any tax changes throughout the year to regularly review tax positions and liabilities ensuring all employee’s are working compliantly.

Or if you’re currently looking for an umbrella company that you can rely on to get paid on time, here at Focused we guarantee prompt, accurate and reliable payment for contractors working inside IR35, it only takes a few short minutes to register your details with us. To get in touch, simply call 0161 923 0210 or email and we will take it from there.