What Can Accountants Expect for the 2024/25 Tax Year?

As the end of the 2023/24 tax year on 5 April 2024 approaches, many businesses will be considering the impact of a range of measures set to take effect in the new tax year.

In this blog post we outline some of the key measures that will take effect from April 2024.

Changes to NICs

At the 2023 Autumn Statement, Chancellor Jeremy Hunt announced significant changes to the National Insurance contributions (NICs) system. From 6 January 2024, the government will cut the main rate of Class 1 employee NICs from 12% to 10%, providing a tax cut for an estimated 27 million working people. The government stated that the average worker earning £35,400 will receive a tax cut of more than £450 in 2024/25.

Meanwhile, from 6 April 2024 Class 2 NICs will be changed. Self-employed workers with profits above £12,570 will no longer be required to pay Class 2 NICs. They will, however, continue to receive access to contributory benefits such as the State Pension.

Self-employed workers with profits between £6,725 and £12,570 will continue to have access to contributory benefits through a National Insurance credit, without paying NICs. Those individuals with profits under £6,725 and others who pay Class 2 NICs voluntarily to receive access to contributory benefits will continue to be able to do so.

Additionally, effective from 6 April 2024 the government will cut the main rate of Class 4 self-employed NICs from 9% to 8%. According to the government, the cut will benefit around two million individuals.

Reduction in the Dividend Allowance

Whilst the rates of taxation on dividend income are set to remain at their current levels, from 6 April 2024 the Dividend Allowance will reduce from £1,000 to £500.

This reduction will affect an estimated 4.4 million individuals in 2024/25, with the average loss being around £155.

Freezing the limits on ISAs

The limits on Individual Savings Accounts (ISAs), Junior ISAs, Lifetime ISAs and Child Trust Funds (CTFs) will be frozen for 2024/25.

However, from April 2024 changes will also be made to permit multiple subscriptions to ISAs of the same type every year and to allow partial transfers of ISA funds in-year between providers.

Merging R&D and SME schemes

The government recently announced that the Research and Development Expenditure Credit (RDEC) and SME schemes will be merged, with expenditure incurred in accounting periods beginning on or after 1 April 2024 being claimed in the merged scheme.

Abolishing the pensions Lifetime Allowance

From 2024/25, the pensions Lifetime Allowance will be abolished. Changes will be implemented to clarify the taxation of lump sums and lump sum death benefits, as well as the application of protections in addition to the tax treatment for overseas pensions, transitional arrangements and reporting requirements.

Changes to business rates in England

From 1 April 2024, the small business multiplier will be frozen for another year in England. The 75% Retail, Hospitality and Leisure relief will be extended for 2024/25. The standard multiplier will be uprated in line with September’s Consumer Prices Index.

The National Living Wage and National Minimum Wage

The government accepted the recommendations of the Low Pay Commission and announced increased rates of the National Living Wage (NLW) and the National Minimum Wage (NMW) which are set to take effect from 1 April 2024. Additionally, from this time the NLW will be extended to 21 and 22-year-olds.

The rates applicable from 1 April 2024 are as follows:

The apprenticeship rate applies to apprentices under 19 or 19 and over in the first year of apprenticeship. The NLW applies to those aged 21 and over.

Whatever 2024 has in store, Mercia will be on hand to keep your clients up to date.