The 2024/25 tax year will be bringing a few changes for small businesses and self-employed workers. Most of these changes will occur on April 6th 2024, the start of the new tax year.

What changes can you expect this year? Our ultimate guide takes you through the key 24/25 changes and their effects on you.

Disclaimer: This blog is solely for informational purposes only. We suggest speaking to an accountant or tax professional before making any changes regarding tax and finance for your business. 

No Change to Personal Allowance

In 24/25 the personal allowance will remain at £12.570 per year. This is the amount of money you can earn tax-free. The personal allowance will remain at this number until 2028 due to a freeze.

• Spring Budget Recap 
• Autumn Budget Recap

2024/25 Tax Year Changes. 

National Insurance Contributions (NIC)

Everyone who earns an income will pay less NIC this tax year. This is due to two tax cuts implemented in the Budget Statement. Additionally, in the Autumn statement, the chancellor announced that the self-employed no longer have to pay Class 2 NICs. Following that, Class 4 NICs were also reduced in the Spring Statement.

Therefore, if you are self-employed you may find yourself paying a little less tax. There is, of course, the option to voluntarily pay class 2 NICs, if your profits are lower than £6,725 you can make class 2 NICs to protect your benefits such as your state pension.

If your business employs people you will still need to pay employee NICs through payroll. 

Reduction in Tax-Free Dividend Allowance 

While there are no changes to the tax rates around dividends. One huge change is the reduction in your tax-free allowance.

In 2023/24 this was £1000, there has been a reduction of 50% to £500. This means you can earn up to £500 in dividends before paying Income Tax on your dividends. 

• What is a dividend?
• How can I pay myself with Dividends? 

Income Tax

Income tax in England, Wales and Northern Ireland for 24/25 will not be changing, The taxable income thresholds for each income band will remain the same as the 23/24 tax year.

For Scottish earners, there will be several changes to the rates and thresholds for 24/25. The key changes are: 
 

• A 1% point increase to the top rate 
• An increase of 6.7% to the starter rate and basic rate thresholds. 
• A new 45% ‘advance rate’ tax band (those earning over £125,140)

The new threshold for the starter rate is now: £12.571 - £14,876 and the basic rate is now: £14,877 - £26,561.

Changes to Wages 
 

In 2024/25 the national living wage will be going up. If you employ any staff you must pay them the minimum wage or above.

The wage changes are as follows: 

VAT Threshold Increases
 

The VAT rate remains the same, however, the threshold has been raised to £90,000 from £85,000. This means your business must pay VAT on earnings over £90,000. However, you can choose to pay VAT before you reach this threshold. 

Capital Gains Tax Reduces
 

Capital Gains Tax reduces from 26% to 24% which means if you earn money from selling properties you will benefit from a 2% tax cut on your profits.

However, the Capital Gains Tax annual allowance will be reduced by 50% to £3000 and full expensing is now permanent.

If you are a landlord or property owner looking to sell in 24/25 you will be directly affected by this reduction and tax cut.

Changes to Business Rates
 

In 2024, there will be a big change for retail, leisure and hospitality businesses from April 6th. Business rates have been based on a new rateable value, however, this has been supported with relief to allow for a smooth transition. From April 6th 2024, the relief is set to end. This may cause a huge surge in business rates for small businesses.

You can use this calculator from gov.uk to estimate your new rates.

Entering a New Tax Year 

A new tax year is a perfect time to reevaluate your business plans and cash flow forecasts. Changes to taxation can heavily impact your cash flow. Therefore, it is imperative to make sure you are aware of any upcoming changes and ready to adapt.

Keep up to date with future changes and advice through our Start-Up Hub.