An overview of the tax changes that will take effect from April 2024
Here is a reminder of the key tax changes that will impact you this year.
Taxes on personal income
Tax allowances for capital gains will be halved
Tax-free allowances will be reduced in the near future if you own investments outside an ISA or plan to sell a second home or other valuable asset.
Currently, you can make gains of up to £6,000 before paying tax (down from £12,300 in 2022-23). Capital gains tax allowances will again be reduced to £3,000 in April 2024.
The dividend allowance is also to be halved
Although dividend income will be taxed at the current rate, the Dividend Allowance will reduce from £1,000 to £500 from 6 April 2024. It is estimated that 4.4 million individuals will be affected by this in 2024/25, and that they will be around £155 worse off as a result.
Limits on ISAs frozen
For 2024/25, the limits on Individual Savings Accounts (ISAs), Junior ISAs, Lifetime ISAs, and Child Trust Funds (CTFs) will be frozen. Changes will be made in April 2024 to allow multiple subscriptions to ISAs of the same type and to allow partial transfers of ISA funds between providers during the year.
Lifetime Allowance to be abolished in pensions
As of 2024/25, the Pensions Lifetime Allowance (LTA) will be abolished, allowing pensioners to use as much income from their pensions as they like (while still paying income tax).
Two main allowances are being created as a result of the abolition of the LTA:
An individual ‘lump sum allowance’ set at £268,275 (a quarter of the current £1,073,100 lifetime allowance) – measuring the tax-free cash taken over someone’s lifetime.
An individual ‘lump sum and death benefit allowance’ set at £1,073,100 – incorporating tax-free lump sums someone takes while alive, plus any serious ill health lump sum and lump sums paid out when they die.
A third allowance will also be set at £1,073,100, measuring pension benefits transferred to overseas pension schemes.
Excess amounts are taxed in the same way as income if they exceed any of these allowances.
A change to NICs
National Insurance contributions (NICs) will undergo significant changes under the 2023 Autumn Statement announced by Chancellor Jeremy Hunt. Approximately 27 million working people will benefit from a tax cut when the main rate of Class 1 employee NICs drops from 12% to 10% in 2024. Tax cuts of more than £450 will be available to workers earning £35,400 in 2024/25, according to the government.
Class 2 NICs will no longer be required for self-employed workers with profits over £12,570 from 6 April 2024. State Pensions and other contributory benefits will, however, remain available to them. The National Insurance credit will continue to provide contributory benefits for self-employed workers with profits between £6,725 and £12,570, without them having to pay NICs.
People who pay Class 2 NICs voluntarily to receive contributory benefits will continue to be able to do so if their profits are less than £6,725 per year. A reduction of 8% will also be made to the main self-employed NIC rate from 6 April 2024. It is estimated that around two million individuals will benefit from the cut.
Business taxes
SME and R&D schemes should be merged
Research and Development Expenditure Credit (RDEC) and SME schemes will be merged, with expenditures incurred after 1 April 2024 being included in the merged scheme.
Business rates in England: changes
The small business multiplier in England will remain frozen for another year from 1 April 2024. There will be an extension of the 75% Retail, Hospitality, and Leisure relief for 2024/25. Consumer prices index for September will be used to update the standard multiplier.
National Minimum Wage and National Living Wage
From 1 April 2024, the government will increase the National Living Wage (NLW) and National Minimum Wage (NMW) in accordance with recommendations by the Low Pay Commission. Furthermore, the NLW will be extended to 21-year-olds and 22-year-olds from this point on.
Following are the rates that will apply from 1 April 2024: