Essential Tax Updates for the New Tax Year 2024/25: Key Changes Impacting Individuals and Businesses

As we embrace the arrival of the 2024/25 tax year starting on 6th April 2024 there are notable changes in the financial landscape that will impact individuals and businesses alike. Let’s delve into the essential tax updates to prepare for the upcoming fiscal year.

Personal Taxes

The upcoming tax year brings noteworthy adjustments in personal taxes. The capital gains tax allowance is set to be halved, affecting individuals with investments outside an ISA or planning to sell valuable assets. From April 2024, the capital gains tax allowance will decrease to £3,000, emphasising the importance of tax planning for asset sales.

Additionally, the dividend allowance will also be halved, reducing from £1,000 to £500. This change will impact around 4.4 million individuals, highlighting the need for strategic financial management.

ISA Limits and Pensions

While ISA limits remain frozen for 2024/25, changes allowing multiple subscriptions and partial transfers between providers will come into effect. Moreover, the Pensions Lifetime Allowance (LTA) is set to be abolished, ushering in a new tax regime for pension withdrawals.

The abolition of the LTA introduces new allowances, including the ‘lump sum allowance’ and ‘lump sum and death benefit allowance,’ providing more flexibility in pension withdrawals.

National Insurance Contributions (NICs) Reforms

Significant reforms to the National Insurance contributions system were announced, benefiting both employees and self-employed individuals. The reduction in Class 1 employee NICs rates and changes to Class 2 and Class 4 NICs will have a direct impact on millions of working individuals, offering tax relief and improved benefits access.

For self-employed workers, the threshold changes and NICs rate cuts aim to enhance financial stability and incentivise entrepreneurship.

Business Taxes and Rates

Businesses will witness the merging of R&D and SME schemes, streamlining the claiming process for research and development expenditures. Additionally, changes to business rates in England and updates to the National Living Wage and National Minimum Wage will shape the economic landscape for businesses across the UK.

Stay informed and prepared for the new tax year, ensuring compliance with the latest regulations and optimising your financial strategies for a successful fiscal year ahead. If you have any questions or concerns about how updates to tax legislation could affect you or your business, get in touch and book a free consultation anywhere in the UK with DSW Tax Advisory.