Personal Tax Changes from 6 April 2024
06/04/2024 - 5 minutes readPersonal tax changes from 6 April 2024 take effect from today with the start of the new tax year 2024/25.
Personal tax changes from 6 April 2024 will see the dividend allowance slashed, employee NICs cut and the high income child benefit cap raised.
Dividend Allowance
Personal tax changes from 6 April 2024 will see the dividend allowance cut to £500 on 6 April from the current £1,000. This will hit owner managed businesses particularly hard and will raise £455m in additional tax in 2024-25. An estimated 4.4m taxpayers are likely to be affected. The allowance was £2,000 in April 2022 and it was reduced to £1,000 in April 2023.
Annual exempt allowance for capital gains tax (CGT)
Personal tax changes from 6 April 2024 will see the Annual exempt allowance for capital gains tax (CGT) halved to £3,000 from the current £6,000. The Annual exempt allowance for capital gains tax (CGT) was £12,300 in April 2022 and it was reduced to £6,000 in April 2023.
New reduced CGT rate for residential property sales
There will be a new reduced CGT rate for residential property sales set at 24%, against the usual 28% rate for higher rate taxpayers. The standard 18% rate remains unchanged for basic rate taxpayers.
Reduction in Employee National Insurance (NI) rates and State pension increases
The rate of employee national insurance contributions (NICs) has been cut by a further 2% to 8%, the second reduction since January 2024 when it was first cut form 12% down to 10%.
Combined with the 2% cut announced at Autumn Statement 2023 which took effect from Jan 2024, this will save the average worker on £35,400 over £900 a year.
This means basic rate taxpayers will pay a tax rate of 28%, compared to 32% on 5 January.
However, basic rate and higher rate tax thresholds remain frozen until 2028 at £12,570 and £50,270 respectively. This will pull more taxpayers into higher rate tax, with over a million expected to face 40% tax charges for the first time as a result. The additional tax 45% threshold remains unchanged at £125,140.
The income limit for married couples’ allowance increases to £37,000 from the current £34,600.
State pension increases to £221.20 a week, up from £203.85, equivalent to £11,502 a year, approaching the basic rate tax threshold of £12,570.
We have summarised the Personal tax changes from 6 April 2024 below:
Income Tax bands of taxable income
| Tax year 2023 to 2024 | Tax year 2024 to 2025 | |
|---|---|---|
| Basic rate | £1 to £37,700 | £1 to £37,700 |
| Higher rate | £37,701 to £125,140 | £37,701 to £125,140 |
| Additional rate | Over £125,140 | Over £125,140 |
Income Tax rates
| Main rates | Tax year 2023 to 2024 | Tax year 2024 to 2025 |
|---|---|---|
| Basic rate | 20% | 20% |
| Higher rate | 40% | 40% |
| Additional rate | 45% | 45% |
These figures apply to non-savings non-dividend income, including income from employment, property, or pensions. From 2017 to 2018, the main rates were separated into the main rates, the savings rates and the default rates.
Reduction in Self-Employed Class 4 National Insurance (NI) rates
Personal tax changes from 6 April 2024 will see the main rate of Class 4 NICs cut from 9% to 6% for two million self-employed people alongside the abolition of the requirement to pay Class 2 NICs – simplifying the tax system and saving an average self-employed person on £28,000 over £650 a year.
Changes to High income child benefit charge (HICBC) and child benefit rates
The high income child benefit charge (HICBC) threshold will increase to £60,000 from the current £50,000.
The charge is tapered so if a parent or their partner, earns between £60,000 and £80,000 it may still be worth claiming.
There is a 1% charge on child benefit for every £200 of income that exceeds £60,000. If income exceeds £80,000, the charge is equal to the amount of the child benefit payment.
Anyone who has opted out of child benefits due to HICBC can start getting them via the HMRC app or online.
Child benefit will increase from £24 to £25.60 for the eldest child, while the rate for other children rises to £16.95 from £15.90.
Families with one child will now receive up to £1,331 a year – an annual increase of £83.20, and up to £881 a year per additional child – an annual increase of £54.60.
How can MCL Accountants help with your queries on Personal tax changes from 6 April 2024?
Contact MCL Accountants on 01702 593 029 if you would like us to answer your queries on the Personal tax changes from 6 April 2024 or if you need any assistance with the preparation and submission of your business accounts or self-assessment tax returns to HMRC.
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Ishan provides financial management, taxation and transactional advice to business entities of all sizes. His expert areas include statutory compliance, business taxation, personal tax & transactional processing and systems. Industry sectors include professional services, retail, hospitality and entertaining & media and advertising services.
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