The Autumn Statement confirms that the main personal allowance and the 40% threshold will be maintained at their 2022/23 levels until the end of 2027/28, resulting in a tax increase as income rises annually.
The threshold for the tapering away of the personal allowance remains at £100,000, reducing to zero at £125,140. This also marks the threshold for the 45% tax rate, creating an effective marginal rate of 60% within the tapering band. This will ultimately affect more individuals as their incomes rise annually.
The dividend allowance, which exempts certain dividend income from taxation while affecting higher rate thresholds, is reduced from £1,000 to £500 for 2024/25 (previously £2,000 until 2022/23).
Tax rates on dividend income over £500 remain unchanged from 2022/23, with rates of 8.75% for basic rate taxpayers, 33.75% for upper rate taxpayers, and 39.35% for additional rate taxpayers.
Following announcements in the 2022/23 Autumn Statements, NIC thresholds remain unchanged until 2027/28. The main rate of Employees' Class 1 NIC is reduced from 12% to 8% effective 6 April 2024, constituting a significant tax reduction for workers, offsetting income tax freezes.
The reduction in Class 4 NIC for the self-employed from 9% to 6% aligns with these changes, offering a maximum tax cut of £1,131 for self-employed individuals. Upper contribution limits for employees and the self-employed remain tied to the 40% income tax threshold, frozen until 2027/28.
Additionally, the requirement for flat-rate Class 2 NICs for self-employed individuals earning above £6,725 will be abolished from April 2024, providing savings for those earning over £12,570.
Following the declaration in the Autumn Statement of 2022, the annual exemption limit for Capital Gains Tax (CGT) will be reduced from £6,000 in the 2023/24 fiscal year to £3,000 for 2024/25.
The CGT rates remain the same, with basic rate taxpayers facing a 10% tax on gains from general assets, and higher rate taxpayers a 20% tax.
Gains from the sale of chargeable residential properties, like second homes or rental units, have been taxed at 18% for gains within the basic rate tax band and 28% for gains taxed at the higher rate.
However, starting from 6 April 2024, the rate for higher rate taxpayers will decrease to 24%. This reduction is expected to generate more tax revenue by incentivising more individuals to realise their capital gains.
The HICBC applies to the higher earner of a couple where one receives Child Benefit and either of them has income exceeding a specified threshold. For 2024/25, the threshold will be raised from £50,000 to £60,000 for the first time since its introduction in 2012/13, and the income band for clawback calculation increased from £10,000 to £20,000, resulting in complete benefit loss at £80,000 income (£60,000 in 2023/24).
Plans to reform the HICBC from April 2026 aim to consider the combined household income, addressing the disparity in clawback between couples, each earning £59,000 (in 2024/25) versus one earning £80,000. However, implementation complexities involve HMRC assessing the couple's income rather than individual earnings.
'Non-doms,' individuals not UK domiciled, have historically enjoyed tax advantages on foreign income and gains, taxable only upon remittance to the UK. Recent restrictions prompted a reform announcement from the Chancellor, effective from 6 April 2025, wherein individuals who haven't been UK residents in the last 10 years, upon becoming UK residents and opting into the regime, will be income tax exempt on foreign income and gains for four years, followed by taxation akin to other UK residents.
Transitional rules will apply to existing UK-resident non-doms, potentially allowing reduced tax rates on accrued income/gains brought to the UK and asset rebasing for calculating taxable gains. Plans also include transitioning to a residence-based regime for Inheritance Tax, with detailed policy and technical consultations forthcoming. Given the complexity of these changes, affected individuals are advised to seek professional advice to comprehend opportunities and risks.
For the fiscal year 2024/25, the contribution limit remains at £20,000 for a standard adult ISA, of which up to £4,000 may be allocated to a Lifetime ISA—a figure that has not changed since the 2017/18 fiscal year. A £9,000 cap is also set for contributions to a Junior ISA or Child Trust Fund.
The government has proposed a discussion on introducing a new 'British ISA', which provides an extra annual contribution allowance of £5,000 specifically for investments in British businesses.
Following last year's budget enhancements, the limits on tax-favoured pension contributions experienced a notable increase: the Annual Allowance was elevated to £60,000, and the Lifetime Allowance (LTA) Charge was eliminated. No additional adjustments were made in the latest Spring Budget.
Trusts and estates receiving income from all sources totalling up to £500 will be exempt from filing a tax return, and the tax responsibility for trustees or estate representatives will be considered zero.
This change is designed to ease the administrative burden on trustees and executors. However, it's important for beneficiaries to review their tax situations, as their implications may change from what they have experienced in past years.
Historically, revenue generated from furnished holiday let properties has been considered trading income for tax purposes, granting it several benefits over traditional property rentals.
These benefits have included unrestricted finance cost relief, capital allowances, and Capital Gains Tax (CGT) business reliefs upon disposal, contingent upon meeting specific criteria regarding availability for rent, actual rental periods, and the duration of guest stays.
These preferential treatments for FHLs will be phased out. This decision aims to level the playing field between short-term and long-term rentals and increase the availability of properties for long-term residential tenants rather than short-term guests.
Effective 1 April 2023, business rates in England were revised to mirror the property value shifts since the 2017 revaluation. To ease the transition to these new rates, a support package was unveiled last year, with additional relief measures introduced in the autumn for the 2024/25 period.
The small business rate multiplier remains unchanged for the fourth year at 49.9p. However, the standard rate multiplier will adjust according to inflation, rising to 54.6p. Retail, hospitality, and leisure sectors eligible for business rates relief will continue to receive a 75% discount, with a maximum benefit of £110,000 per business.
CIS mandates tax deductions (at rates of 20% or 30%) by many businesses from payments to subcontractors, except when the subcontractor has gross payment status (GPS), which HMRC awards to those demonstrating consistent tax compliance.
Starting 6 April 2024, VAT responsibilities will be incorporated into obtaining and retaining gross payment status criteria.
The current Corporation Tax rate remains at 25% for businesses with profits exceeding £250,000, while the 'small profits rate' is sustained at 19% for companies earning up to £50,000.
For earnings between £50,000 and £250,000, there's a gradual scale that results in an effective marginal rate of 26.5% within this range, with an overall rate varying from 19% to 25% based on total profits.
The year 2023 saw the introduction of 'full expensing' for most plant and machinery investments, allowing businesses to deduct the full cost in the year of acquisition. However, this relief does not extend to companies purchasing equipment to lease to others.
The Chancellor has indicated plans to potentially broaden this expensing to include leased assets 'when fiscal conditions permit', with draft legislation to be introduced in due course.
The thresholds for VAT registration and deregistration were previously set to remain unchanged at £85,000 and £83,000, respectively, until 31 March 2026. Marking the first adjustment since April 2017, these thresholds have been raised to £90,000 for registration and £88,000 for deregistration, starting from 1 April 2024.
In the 2023/24 tax year, individuals earning over £150,000 are mandated to complete a self-assessment tax return. The 2023 Autumn Statement, however, revealed plans to exempt those who fully settle their taxes through PAYE from this requirement starting in the 2024/25 tax year. Despite this, rising interest rates on savings and reductions in both the CGT annual exempt amount and dividend allowance might increase the number of individuals with taxable income not covered by PAYE, necessitating them to report these earnings to HMRC.
MDR, a concession on Stamp Duty Land Tax (SDLT) for purchasing properties in bulk, has been reviewed by the Government. It was found not to meet its initial goals and is prone to exploitation. As a result, this relief will be phased out for all transactions dated 1 June 2024 or later.
However, there are transitional provisions in place that allow MDR to be applied to contracts exchanged on or before 6 March 2024, with no regard to the completion date. Nevertheless, this is contingent upon certain criteria, such as no amendments to the contract post that date.
Starting 1 April 2024, the National Living Wage (NLW) will be extended to include individuals aged 21 and above (previously applicable to those 23 and older), increasing from £10.42 to £11.44 per hour.
As anticipated, the Chancellor has announced the continuation of the 5p reduction in fuel duty for the following year, marking the third consecutive year of a freeze on the rate.
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