As we bid farewell to the old tax year and welcome the new one, it’s time to prepare ourselves for some changes and updates in the tax landscape. Whether you’re an individual taxpayer or a business owner, understanding the key updates and deadlines for the new tax year is crucial for effective financial planning. So, let’s delve into what you need to know for the upcoming tax year.
1. Personal Allowance and Tax Bands
One of the most significant changes each tax year is the adjustment of personal allowances and tax bands. Sadly the government have again decided not to increase these thresholds, despite the inflation levels we’ve experienced. So again for the tax year 2024/25, the basic Personal Allowance is £12,570, while the Higher Rate Threshold stands at £50,270. This means that you can earn up to £50,270 before being taxed at the higher rate of 40%. However, for those earning over £100,000, there is a gradual withdrawal of the Personal Allowance, reducing it to zero for those earning £125,140 or more.
2. National Insurance Contributions
National Insurance rates are also subject to change in the new tax year. For employees, the primary threshold is £9,880, with a new rate of 8% on earnings between this threshold and £50,270, and 2% on earnings above this. Employers also have their obligations, with a secondary threshold of £8,840 and a rate of 13.8% on earnings above this threshold. The self-employed have their own National Insurance rates and thresholds to consider as well.
3. Tax-Efficient Investments and Savings
Tax-efficient investments remain an essential aspect of financial planning. For the new tax year, individuals can take advantage of tax-free savings allowances, such as the ISA (Individual Savings Account) allowance, which stands at £20,000. Additionally, contributions to pensions benefit from tax relief, with the annual allowance set at £40,000. However, this allowance can be subject to tapering for higher earners.
4. Capital Gains Tax (CGT)
For those involved in selling assets, it’s essential to be aware of any changes to Capital Gains Tax. The annual exempt amount for individuals is now £3,000 for the tax year 2024/25.  The CGT rate remains at 10%, to the extent that any income tax basic rate band is available, and 20% thereafter. Higher rates apply for certain gains, mainly chargeable gains on residential properties, with the exception of any element that qualifies for Private Residence Relief. These rates are changed from 18% and 28% in 2023/24 to 18% and 24% in 2024/25.
5. Corporation Tax
Business owners need to be aware of any changes to Corporation Tax rates and allowances. From April 2023, Corporation Tax rates increased for companies with profits over £250,000, reaching 25%. However, companies with profits under £50,000 will continue to benefit from a reduced rate of 19%.
6. Making Tax Digital (MTD)
The implementation of Making Tax Digital continues to progress, aiming to streamline the tax system by requiring businesses to maintain digital records and submit quarterly updates to HMRC. While smaller businesses might not be affected immediately, it’s essential to stay informed about MTD requirements, especially if your turnover exceeds the VAT threshold.
Conclusion
As we step into the new tax year, staying informed about the latest updates and changes in tax regulations is crucial for individuals and businesses alike. Whether it’s understanding adjustments to personal allowances, tax rates, or investment opportunities, being proactive in your financial planning can help you make the most of your resources while ensuring compliance with HMRC regulations. So, take the time to review your finances, seek advice if needed, and embark on the new tax year with confidence.
If you’re interested in finding out more about the new tax year, and what it might mean for your business, you can get in touch with our team today and we’ll do all we can to help.
Jo Moran
Jo Moran is a Chartered Accountant at Rogers Spencer and has been working with us since 2011. Jo specialises in Accountancy Solutions, Audits and Payroll Administration. Find out more about Jo here.