So let’s look at the new changes that have been introduced for April 2024. The start of any new tax year normally brings a raft of changes that will impact the personal finances of individuals.
New bandings and rates are usually implemented on 6th April being the start of each new tax year. They can have minimal or drastic effects on people and the decisions they make moving forwards with regard to personal finances and future planning.
So what major changes have come into effect for this tax year ?
-
Personal income tax allowances
Unfortunately, rates have again been frozen at current levels, and will continue to do so until April 2028. They may well be changed in the meantime if a new government wins the next election due later in 2024.
Current rates: £ 0 – 12,570 (tax free allowance)
Basic rate: £ 12,571 – £ 50,270 (20%)
Higher rate: £ 50,271 – £ 125,140 (40%)
Over £ 125,140: Additional rate of 45%
By not raising these thresholds, more people will be pushed into higher tax brackets as a result of annual pay awards.
Link to GOV.uk personal tax bands – 2024 to 2025
http://www.gov.uk/personal tax allowance
This is considered a stealth tax, as a lot of people won’t realise it may affect them. As they are taxed at source through the PAYE system through their employment.
2. Dividend tax being halved.
The tax free dividend allowance for the tax year 2023 to 2024 was set at £ 1,000.
This has now been halved to £ 500 before an individual is liable for dividend tax.
This will drag a lot more individuals into paying this so-called tax who may have never do so before. This will normally have to declared through completing self-assessments forms via your Gov.uk gateway account.
So what rates are now payable by individuals ?
Basic rate taxpayers – pay 8.75% over excess amount
Higher rate taxpayers – pay 33.75% over excess amount.
Additional rate taxpayers – pay 39.35% over excess amount.
Further information can be found at:
http://www.gov.co.uk.tax-on-dividends
It may be beneficial in future to hold any investments within a tax free ISA wrapper or private pension. This may be an ideal way to eliminate paying this tax. Thereby reducing potential tax liability and the need to complete self-assessment form each January for previous tax year.
Another alternative may be to transfer assets to a spouse to eliminate this issue.
3. Reduction in capital gains tax allowance.
Again the rate of capital gains tax has been halved with immediate effect. Capital gains tax is liable when you sell an asset or dispose of something that has increased in value.
Disposal can be by selling it, giving it away as a gift, swapping for something else.
You only have to pay capital gains tax on your overall gains now in excess of your tax-free allowance (known as Annual exempt amount) currently £ 3000 for individuals or £ 1,500 for trusts.
Simple example: If you bought share for £ 5,000 then sold for £ 10,000. The gain would be £ 5,000 minus any associated costs to buy and sell.
You don’t usually pay it on gifts to husband, wife, civil partner or a charity. Other exempt items include investments in ISA or PEP, Personal pension, Gilts and Premium Bonds, betting or lottery winnings.
link for further information via gov.uk
https://www.gov.uk/capital-gains-tax
So what rates are now payable:
If you pay higher rate income tax:
24% on gains from residential property (not main residence)
28% on gains from carries interest, if you manage an investment fund
20% on gains from all other chargeable assets.
If you pay basic rate income tax:
If the amount is in the basic income rate band you pay 10% on your gains, or 18% if you own residential property or carried interest. Or 20% on any amount over basic rate, or 24% on residential property and 28% on carried interest.
4. Lifetime allowance limit abolished for pensions.
From this tax-year the Lifetime Allowance of £ 1,073,100 on your collective pensions has effectively been abolished. When you normally access income from a pension the provider will do a test and calculation against other pensions you may have.
Although the LTA has been abolished you are still restricted to taking 25% tax free, so this sum is limited to £ 268,275.
In it’s place will be something new called the lump sum and death benefit allowance. So this is the amount that you or beneficiaries can take from pensions as a tax-free lump sum. (Unless you have applied for some kind of pensions protection in past years)
Link to Moneyhelper.org.uk for details on pension lifetime allowance
https://www.google.com/url?sa=t&source=web&rct=j&opi=89978449&url=https://www.moneyhelper.org.uk/en/pensions-and-retirement/building-your-retirement-pot/lifetime-allowance-for-pension-savings&ved=2ahUKEwiYnrKj-reFAxUm7QIHHQd1B6kQFnoECBwQAQ&usg=AOvVaw3UxMr_0Jt-1TeVkxQ473mi
5. National Insurance is cut again.
National insurance is paid by individuals from the age of 16 to state pension age, currently aged 66. As long as they are earning over £ 242 per week. Or the self-employed and they are making profit of £ 12,570 per annum.
The rate was recently cut in January 2024 from 12% to 10%.
This has now been cut again from April 2024 from 10% to 8%.
Most individuals don’t have to make any adjustments as this amount will normally be deducted as source through the payroll automatically by a employer.
So how much saving can someone expect each month or year ?
Annual salary: £ 25,000 – costs as per April 2024, annual cost of £ 994.40 – so a saving of £ 248.60 per year
Salary: £ 35,000 – costs as per April 2024, annual cost of £ 1794.40 – so a saving of £ 448.60 per year
Salary: £ 50,000 – costs as per April 2024, annual cost of £ 2994.40 – so a saving of £ 748.60 per year
The self-employed have different rates, so those rates are cut from 9% down to 6%.
Links to gov.uk for further information on new NI rates and rules:
https://www.gov.uk/national-insurance
6. National minimum wage is increased.
The amount of minimum wage an employer can pay its employee’s has been increased substantially. Boosting the lowest paid workers income levels within the UK.
So what rates are now payable ?
Aged 21 and over – £ 11.44 per hour
Aged 18 to 20 – £ 8.60 per hour
Under 18 – £ 6.40 per hour
Apprentices – £ 6.40 per hour
http://www.gov.uk/national-minimum-wage
7. Basic UK state pension is increased.
Those people who are aged 66 and over in receipt or the state pension are also going to receive a pay increase. This figure has been increased by 8.5% in line with the so-called triple lock.
For those people on the “new state pension” effective from April 2016 the weekly amount has gone from £ 203.85 to £ 221.20, which means an annual pension of £ 11,542 per annum.
This amount is normally paid every 4 weeks and you have to claim it once you receive state pension age. You normally need 35 years NI contributions to receive full entitlement.
Anybody who reached state pension age prior to April 2016 and is on the old flat rate of £ 169.50, equivalent to annual amount of £ 8,814 per annum.
Most people will pay no income tax on their state pension income as it is below the tax-free personal allowance. But people should be aware that it would be added to any other income received within that tax year, along with any other sources and will be taxed accordingly as per rates highlighted above in part 1.
http://www.gov.uk/state-pension
8. Council tax rates are again increased.
Most council boroughs are increasing council tax bills by around 5%, based upon a survey undertaken by the County Councils Network. Although the actual increase will depend upon your own council borough and your residential dwelling banding.
A simple example an increase of 5% across band D property would result in an annual increase of £ 103 per annum to around £ 2,168 from April.
For my own borough, a band D property is charging £ 232 per month or £ 2321.63 per annum. Whereby the council tax went up by 2.99%, costs for adult care went up by 2%, Fire & rescue went up 3% and Police and Crime Commissioner went up by 5.2%.
9. Mobile contracts & broadband fees rise
Broadband and mobile providers will normally increase contracts on 1st April each year. These are added to contracts and pegged to the RPI measure of inflation.
As the rate of RPI is higher than CPI, many people will be surprised or shocked as to how much their contract may increase in value.
For example, 02 and Virgin media will have increased some contracts by 8.8% and this could apply to mobile phone contracts or existing broadband deals. My own provider Talktalk has increased contracts by 7.7% with effect from 1st April 2024.
So what can you do to combat these large price increases. It may an idea to change providers, move tariffs or haggle to get a better price.
Or alternatively shop around through comparison sites such as www.quidco.com or www.uswitch.com
10. New energy price cap has been introduced.
Some good news for consumers after the effects of the Russia / Ukraine conflict and energy prices skyrocketing in a very quick timeframe. We will see the Energy price cap be limited to £ 1,690 per year for a typical household from the period of 1st April to 30th June 2024.
This will apply to all customers who pay for gas and electricity by direct debit. This figure has been reduced by 12% against the previous quarterly figure used.
The next review will take place in 3 months so April, then in July and October and is predicted to fall again in July 2024 when the new rate will be implemented.
The price cap sets a limit on the amount of rates you pay, but your personal bills all depends on the consumption used by that respective household
http://www.ofgem.gov.uk/energy-price-cap
11. Child benefit extended to more families.
The rules around the child benefit thresholds have been increased, it is payable to anyone who has children under the age of 16 or under 20 if they stay in approved education or training.
At present it is paid every 4 weeks and is £ 25.60 (weekly) for the eldest child and £ 16.95 (weekly) for each additional child.
Prior to April 2024 the “adjusted net income” was £ 50,000 a year and has now been increased to £ 60,000 per year. Over the above you may have to pay the Higher Income Child Benefit Charge.
If you do pay the charge, you can still get other advantages such as National Insurance credits. If you and your partner both have an income over £ 60,000, then whoever has the highest adjusted net income is responsible for paying the charge.
Say, either one has an income of £ 80,000 you will now be charged the same amount as you make through child benefit payments, so you will end up with no extra money.
As a result of these changes introduced it is believed that nearly 500,000 people will be financially better off moving forwards.
http://www.gov.uk/child-benefit
12. Free childcare house are being extended.
With effect from April 2024, the amount of free child care has been increased.
For 2 year old, you can now get 15 hours free childcare.
For 3 to 4 year old, you can now get 30 hours free childcare.
From September 2024, you can get 15 hours free child care for your child from the age of 9 months if you’re working. Applications can be made from 12th May. If your child doesn’t live with you, unfortunately you will no be eligible.
Be the first to reply