It’s a new tax year, and there are some changes to take on board.
Jeremy Hunt’s 2024 Spring Budget contained some crowd-pleasers with an eye to the General Election later this year, such as a rise in the National Living Wage and child benefit, and a cut in National Insurance.
But what’s going to affect you? Here’s our guide to what you need to take on board that’s changing, and what is staying the same.
WHAT’S CHANGING
NATIONAL INSURANCE
Employers’ National Insurance thresholds are adjusted, with the upper earnings limit rising to £50,270 per year. The primary threshold for National Insurance contributions is increased to £10,720 per year. The self-employed will benefit from the cut in the Class 4 rate from 9% down to 6% and the fact they no longer have to pay Class 2 contributions.
NATIONAL LIVING WAGE
From April 1st 2024, the National Living Wage rose to £11.44 for anyone aged 21 and over. This replaces the two previous bands for those aged 21 and over, and those 23 and over. This is the second consecutive year that it’s risen by around £1.
CHILD BENEFIT
Child Benefit rates are increased, with the eldest or only child receiving £25.60 per week and additional children receiving £16.95 per week. Full benefit will be paid to households where the high-earning parent earns up to £60,000, a rise from £50,000.
CAPITAL GAINS TAX
The new Annual Exempt Amount (AEA) for individuals, trustees for disabled people and personal representatives is £3,000, and for other trustees £1,500. The previous year’s drop was down from £12,300 to £6,000, so this further drop is going to be unwelcome for many. However, as a glimmer of positivity, the Capital Gains Tax allowance for disposing of a property asset that isn’t your main residence will reduce from 28% to 24% this year.
STATE PENSIONS
Up 8.5% this year, in line with the so called triple lock. So that means pensioners on the full allowance will now get £221.20 a week, up from £203.85.
DIVIDEND INCOME
The dividend tax rate is going up to 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers, and 39.35% for additional rate taxpayers. The annual tax free allowance for dividend allowance drops by 50% to £500 this year. So, if you have shares in a company you need to look out for this.
WHAT’S STAYING THE SAME
PERSONAL ALLOWANCE
Everything is frozen until 2028. The amount of income before you pay tax as stays at £12,570. After that, the basic rate of tax stays at 20%, and the high rate band still starts at £50,270. After that, the additional rate threshold – 45% – stays at £125,140.
PERSONAL PENSION
The annual allowance for pension contributions remains at £60,000. This is the amount you and your employer or third party can put in and still get tax relief. But the Lifetime Allowance has been scrapped, meaning there’s no limit on how much you can accumulate in your pension and is replaced by three new allowances – the lump sum allowance, and the lump sum and death benefit allowance and overseas transfer allowance which are both set at £1,073,100. If you’re ready to retire, the Government has capped the pension tax-free lump sum at £268,275 or 25% of your pot, whichever is lower. Tax relief on personal contributions is also limited to up to 100% of your earnings – if you earn less than £3,600 then it’s that amount.
SAVINGS
The ISA yearly deposit limit remains at £20,000 per year for adults, for both Stocks & Shares and Cash ISAs – and £9,000 per year for Junior ISAs. Junior ISAs remain an excellent way to invest and give children and grandchildren a financial head start. The British or UK Stocks & Share ISA has been announced with a £5,000 per year limit on top of the existing ISA allowance. The ISA encourages people to invest in British companies, and details are being finalised ahead of launch. The Personal Savings Allowance remains at £1,000 for basic rate taxpayers, £500 for higher rate taxpayers, and zero for additional rate taxpayers. This is the level before which you don’t pay any tax. Savings income is taxed at the same rates as non-savings income, with the Personal Savings Allowance providing tax-free thresholds.
INHERITANCE TAX
The inheritance tax nil-rate band remains at £325,000, with the residence nil-rate band continuing at £175,000.
CORPORATION TAX
The rate remains at 19% for this financial year. That’s on profits up to £50,000. It’s 25% on profits over £250,000 and 26.5% on profits between those two levels.
