Significant Changes in the New Tax Year 2024/25: Impact of National Insurance Adjustments and Dividend Allowance Cuts

As the 2023/24 tax year draws to a close on April 5, 2024, businesses worldwide are gearing up for significant changes anticipated in the new tax year. The upcoming fiscal year is poised to introduce a range of measures that will impact both businesses and individuals alike.

Key National Insurance Contributions (NICs) Changes in the New Tax Year

One of the key alterations in the new tax year revolves around National Insurance contributions (NICs). Chancellor Jeremy Hunt has unveiled a series of adjustments to the NICs system, notably reducing the main rate of Class 1 employee NICs from 12% to 10%, effective from January 6, 2024. This move is expected to result in tax reductions for approximately 27 million working individuals, with the average worker earning £35,400 projected to benefit by over £450 in the 2024/25 fiscal year.

Moreover, changes are on the horizon for Class 2 NICs for self-employed individuals. Commencing April 6, 2024, self-employed workers with profits exceeding £12,570 will be exempt from paying Class 2 NICs. This adjustment aims to streamline the system while ensuring continued access to benefits like the State Pension.

Revised Tax and ISA Updates for 2024/25

In addition to these revisions, the Dividend Allowance is set to decrease from £1,000 to £500 starting April 6, 2024, impacting approximately 4.4 million individuals, each facing an average loss of around £155.

The government’s decision to freeze ISA (Individual Savings Account) limits for the 2024/25 tax year will have implications for savers and investors. Despite the freeze, new provisions allowing for multiple subscriptions to ISAs of the same type annually and enabling partial transfers of ISA funds between providers within the year will be implemented from April 2024.

Merging of Research and Development Expenditure Credit (RDEC) and SME Schemes

Recently, the government revealed a significant update in merging the Research and Development Expenditure Credit (RDEC) and SME schemes. Starting from accounting periods commencing on or after 1st April 2024, the merged scheme will allow claiming expenditures seamlessly.

Stay abreast of these impending changes and their ramifications for the forthcoming tax year. For further insights and expert guidance on tax matters, be sure to get in touch. Studholme-Bell are here to provide tailored advice to meet your specific financial requirements. Consider consulting tax professionals for personalised support in optimising your financial strategies and ensuring compliance with the evolving landscape of tax regulations.