With the start of the 2024/25 tax year, taxpayers can expect significant changes that will directly impact their finances.
If you haven’t already, it’s time to closely examine your financial planning, including savings, investments, and tax compliance.
So, what changes should you be aware of from 6 April 2024?
- Employee National Insurance Contributions (NICs): Primary Class 1 NICs for employees will be reduced from ten per cent to eight per cent, aligning with the Government’s efforts to lower the tax burden.
- Self-employed National Insurance Contributions (NICs): Class 4 NICs for the self-employed will drop from nine per cent to six per cent, alongside the abolition of Class 2 NICs for those with profits over £12,570, simplifying tax responsibilities and maintaining access to contributory benefits.
- Capital Gains Tax (CGT): The higher CGT rate on the sale of second and additional homes drops from 28 per cent to 24 per cent. This move means you might need to reassess your property investment and disposal strategies.
- Stamp Duty Land Tax (SDLT): The Government is scrapping Multiple Dwellings Relief starting from 1 June 2024. If you’re buying multiple properties at the same time, this might increase the SDLT liability.
- VAT registration threshold: Rising from £85,000 to £90,000 from 1 April 2024, the new threshold might offer a slight reprieve for some small businesses. It’s crucial to understand when you must now register for VAT.
Consulting with your accountant is the best way to navigate these changes effectively.
What do these changes mean for you?
For the self-employed, the significant decrease in Class 4 NICs from nine per cent to six per cent, coupled with the abolition of Class 2 NICs for those earning over £12,570 will potentially reduce the overall tax liability and allow for a better allocation of funds towards business growth, savings, or personal investment.
The VAT registration threshold increase to £90,000 has the potential to benefit small businesses trading close to the threshold by delaying the requirement to register for VAT.
To fully understand the impact, businesses with an annual turnover of £80,000-£90,000 should review their position to ensure they remain compliant with VAT registration requirements at the new thresholds.
It is sometimes worth registering for VAT early, particularly if your customers are VAT registered businesses that can reclaim any VAT charged.
The abolition of Multiple Dwellings Relief in June 2024 might affect those investing in property.
With this relief gone, it will be more costly to acquire multiple properties in a single transaction or linked transactions. It might be worth exploring alternative tax-efficient investment strategies. This could include focusing on sectors or assets not affected by this change, such as commercial properties or investments that qualify for other forms of tax relief.
The Government is also promoting tax reliefs for investments in digital and green technologies, aiming to foster innovation and environmentally sustainable business practices.
These incentives, like Enhanced Capital Allowances, could offer considerable savings to larger firms and should encourage investment in qualifying technology and green energy projects, including solar panels, wind turbines, and energy-efficient equipment.
For higher-rate taxpayers selling second and additional homes, the decrease in the CGT rate from 28 per cent to 24 per cent offers a more favourable tax environment.
This change suggests a window of opportunity for tax-efficient disposals and requires a review of your timing and strategy to maximise benefits. With the tax benefits of furnished holiday homes being withdrawn from April 2025, this provides a lower tax burden for those selling holiday rentals as a result of the change.
Looking further ahead, the reform targeting non-UK domiciled individuals, transitioning to a residence-based tax system from April 2025, brings increased responsibility for those affected.
If you are a non-dom residing in the UK for over four years, you’ll face increased tax liabilities on your global income and gains.
This tax year might be an opportune moment to carefully review your residency status and potentially restructure your financial affairs to mitigate the impact of these changes.
With taxes undergoing considerable changes in the 2024/25 tax year, it is crucial to actively review and adapt your financial and tax planning strategies.
Engaging with a tax professional is the best way to receive customised advice that helps you navigate the complexities of the tax system effectively, ensuring you leverage every available relief to optimise your financial position.
If you require further information on your new tax liabilities, please contact one of our team.