As you are probably aware, the new tax year starts on 6th April. This is often the date that new tax rates and rules come into force, but it's easy to lose track of the changes and updates. Efficient tax planning helps to ensure your business runs effectively and you benefit from any tax changes. But as a busy business owner, it's not always at the forefront of your mind.
Talking to an accountant can help you understand any changes and how they impact you and your business to make sure you're planning for taxes effectively. So what does the new tax year have in store for you and your business?
Here's our quick overview of key changes:
VAT thresholds increased
The threshold for registering for VAT will be increase to a taxable turnover of £90,000 from 1st April 2024. Businesses making less than £88,000 will be able to apply for de-registration from the VAT scheme from 1st April 2024.
Dividend allowance reduction
From 6th April 2024, the dividend allowance will reduce to £500. This is the amount of dividends that an individual can receive before paying tax on dividends.
Class 1 National Insurance Contribution (NIC) employee rate reduced
The main rate of Class 1 NICs will go down again from 6th April 2024, following a reduction in January of this year. The NIC rate applicable for workers earning between £12,570 and £50,270 will be 8% from 6th April 2024. The higher employee NIC rate of 2% on earnings above £50,270 remains unchanged.
The employer NIC rate remains at 13.8% on earnings.
Class 2 National Insurance Contribution (NIC) abolished
From 6th April 2024, sole traders with profits over £12,570 will no longer need to pay Class 2 NIC payments. Those individuals will still be entitled to contributory benefits.
Sole traders with profits between £6,725 and £12,570 will keep their entitlement to contributory benefits. Sole traders with profits under £6,725 can pay voluntary NIC to access contributory benefits, as is currently the case.
Class 4 National Insurance Contribution (NIC) rate reduced
The main rate of Class 4 NIC, payable by self-employed individuals, will reduce to 6% on profits between £12,570 and £50,270 from 6th April 2024. The class 4 NIC rate remains at 2% on profits over £50,270.
Capital Gains Tax (CGT) Annual Exempt Amount (AEA) reduction
The amount of chargeable gains that can be made before tax is due, known as the Annual Exempt Amount, will reduce from 6th April 2024 to £3,000 for individuals and personal representatives and £1,500 for most trustees.
Capital Gains Tax (CGT) rate reduced
The Capital Gains Tax rate on residential property disposals for individuals who pay tax at a higher rate, trustees and personal representatives, will reduce to 24% from 6th April 2024.
There is no change to the lower rate of CGT for basic rate taxpayers on residential property disposals, which remains at 18%.
ISA rule changes
From 6th April 2024, individuals will be able to pay into more than one type of ISA. Savers will also be able to move funds more easily between providers to find higher returns on investment.
The annual ISA limit is £20,000, which includes a limit of £4,000 for a Lifetime ISA. A consultation into a new UK ISA is also underway which will give individuals an additional £5,000 ISA limit.
High Income Child Benefit Charge (HICBC) threshold change
The threshold for the HICBC will increase to £60,000 from 6th April 2024. This means individuals earning below this amount will not need to pay any tax on their child benefit income.
The taper rate has also been halved, meaning individuals earning between £60,000 and £80,000 will be liable to a tax charge. Those earning above £80,000 will need to pay a tax charge equal to their child benefit income.
The HICBC rules will continue to be based on individual income, but plans to make the system fairer will look at using household income from April 2026.
National Minimum Wage and National Living Wage
From 1st April 2024, the new National Minimum Wage and changes to the National Living Wage will apply. From 1st April 2024 the National Living Wage is applicable to workers aged 21 and over.
| Rate from April 2024 |
National Living Wage | £11.44 |
18-20 Year Old Rate | £8.60 |
Under 18 Rate | £6.40 |
Apprentice Rate | £6.40 |
You may prefer to discuss the impact of these changes with an accountant, to ensure maximum tax efficiency. Our helpful team at Purple Accounts can help you with all your tax planning needs, payroll, bookkeeping and accounts.
To discuss your options further, speak to our expert team today on: 01925 979500 or email: enquiries@purpleaccounts.com
This article was written in March 2024 and therefore the content may no longer be valid at the time of reading. Please consult with your accountant on the latest changes that may impact you and your business.