PERSONAL TAX AND NI

 

Income tax rates and allowances 2024/25

The personal allowance for income tax remains at £12,570 for 2024/25. This will be frozen until April 2026. The basic rate band limit for England and Wales also remains at £37,700, frozen until April 2026.

The threshold for abatement of the personal allowance remains unchanged, with £1 being lost for every £2 that income exceeds £100,000, until £125,140 where it will be reduced to nil.

2024 Spring Budget Measure

The income limit for the Married Couples Allowance has increased to £37,000 (£34,600 in 2023/24) - only applicable to taxpayers born before 6 April 1935.

 

Dividends

The dividend tax rates remain 8.75%, 33.75% and 39.35% for basic, higher and additional rate taxpayers respectively. The dividend allowance is reduced to £500.

 

Scottish taxpayers

The Scottish Parliament is able to vary the rates and bands of income tax (but not NI) that apply to Scottish taxpayers. The rates and thresholds for a Scottish taxpayer in 2024/25 are as follows:

Bands	Band name	Rates (%)
Over £12,571 - £14,876	Starter rate	19
£14,877 - £26,561	Basic rate	20
£26,562 - £43,662	Intermediate rate	21
£43,663 - £75,000	Higher rate	42
£75,001 - £125,140	Advanced rate	45
Above £125,140	Top rate	48

 

 

 

 

 

 

 

 

The advanced rate is new for 2024/25.

For 2024/25, the UK higher rate threshold is £37,700, but the Scottish equivalent is £31,093. This means that a Scottish taxpayer earning £45,000 will be a higher rate taxpayer, but someone in the rest of the UK will not. This is exacerbated by the fact that the upper earnings/profits limit for NI purposes is still £50,270, so a Scottish taxpayer with employed earnings between £43,663 and £50,270 will have a marginal tax rate of 50%.

Note that the Scottish rates of tax only apply to:

•       employment income

•       self-employment income

•       rental income

•       pension income.

Hence, savings and dividend income continue to be taxed at the main UK rates of tax.

The Scottish tax regime will only apply to an individual who has Scottish taxpayer status - that is anyone who lives in Scotland or whose main home is in Scotland. It can also apply to someone who does not have a home in Scotland but visits very frequently. For example, someone who visits regularly for work purposes and stays overnight in hotels could potentially acquire Scottish taxpayer status.

 

Welsh taxpayers

Since April 2019, the Welsh assembly has had the same powers devolved to it. However, since then the Welsh rates and bands have been set to mirror the main UK rates, so there is no change for the time being. The First Minister has refused to rule out future rises in rates.

 

NATIONAL INSURANCE

NI contributions - rates

The 2023 Autumn Statement reduced the main primary Class 1 NI rate to 10% from 6 January 2024.

2024 Spring Budget Measure

The 2024 Spring Budget cut this further, with the main rate falling to 8% from 6 April 2024.

 

NI contributions - thresholds

The threshold for paying primary Class 1 contributions will be £242 per week, or £12,570 per year for 2024/25. 

2024 Spring Budget Measure

Above these thresholds, employees pay primary Class 1 contributions at 8% for earnings up to £50,270. Above this upper earnings limit, the marginal rate is 2%.

For employers, the secondary Class 1 NI threshold for paying contributions is set at £175 per week, or £9,100 per year.

The employment allowance is £5,000.

 

NI contributions - self-employed

The Class 4 lower profits limit is also £12,570 for 2024/25.

2024 Spring Budget Measure

For profits above this, self-employed workers pay at 6% for profits up to £50,270, and 2% on any excess for 2024/25.

Compulsory Class 2 NI contributions will no longer be payable from 2024/25 onward. Where profits exceed the small profits threshold of £6,725 but do not exceed £12,570 (previously called the lower profits threshold), the individual will continue to build entitlement toward contributory benefits, e.g. the State Retirement Pension. Where profits do not exceed £6,725, Class 2 NI can be paid voluntarily at £3.45 per week in order to build entitlement.

 

Pensions - lifetime limit

The lifetime allowance for defined contributions will be abolished from 6 April 2024. For 2023/24, the lifetime allowance charge was removed; however, further legislative changes were required to completely remove the allowance.

 

High income child benefit charge (HICBC)

The way that the HICBC operates has been criticised ever since it was implemented. In particular, critics point to the fact that a two-income household with respective incomes of just under £50,000 each will not be subject to the charge, but a single person earning £60,000 will be subject to a 100% clawback despite having less net income.

2024 Spring Budget Measure

The government will consult on how to move to a “household income” based charge, rather than looking at the highest earner. As this will require HMRC to be able to gather information about household income, there is no set implementation date.

For 2024/25, a stopgap measure will apply. The HICBC threshold will increase to £60,000 (from £50,000), and the point that the charge withdraws the benefit in full is increased to £80,000. This means the withdrawal rate is 1% for every £200 of income in excess of the threshold.

 

Non-domiciled tax status

Currently, an individual who is UK resident, but non-UK domiciled, can access the remittance basis of taxation - broadly meaning that they are only taxed on their offshore income and gains to the extent that they are remitted to the UK. UK residence has been determined using the statutory residence test for over a decade. However, domicile is a general law concept with no statutory definition. Domicile is seen by some as an outdated concept, particularly as it can bestow a domicile of origin on someone for a country they have never been to, let alone lived in.

2024 Spring Budget Measure

From 6 April 2025, the remittance basis will be scrapped. UK tax status for income and capital gains tax purposes will be wholly determined by residence, with special rules for new arrivals.

In summary:

• Individuals arriving in the UK with a period of at least ten years’ non-residence will have a four-year period where foreign income and gains (FIG) will be free of UK tax. There will be no requirement to keep the funds offshore.
• After the four-year tax-free FIG period, tax on FIG will be in accordance with the general rules for UK tax.
• There will be transitional rules for existing remittance basis users, including a two-year repatriation period at a flat 12% rate.

 

Savings and investments

ISAs, Junior ISAs and Child Trust Funds

The annual investment limit for ISA accounts remains at £20,000 per individual for 2024/25. In keeping with the general tactic of freezing tax-free allowances to help public finances following the pandemic, the children’s savings allowances have also been kept at £9,000 for Junior ISAs and Child Trust Funds.

2024 Spring Budget Measure

A new UK ISA with an annual investment limit of £5,000, aimed at encouraging investment into UK markets, was announced. This will be in addition to the regular ISA allowance. However, there is currently no start date as the policy is undergoing consultation. It is unlikely to be implemented before the next general election.

 

HMRC rates of interest

 

The official rate of interest has been set at 2.25% since 6 April 2023.

The official rate is used to calculate the taxable amount of benefits in kind for low or zero-interest loans by employers to employees. It is also a factor in the calculation of the benefit in kind charge for work-related accommodation and the pre-owned assets tax.

The interest rates for late payment of most taxes, including income tax, corporation tax pay and file liabilities, capital gains tax, and NI is set by adding 2.5% to the Bank of England base rate. It changed several times in 2022 and 2023, but has remained at 7.75% since August 2023.

From	Late payment %	Repayment %
22 August 2023	7.75	4.25
11 July 2023	7.50	4.00
31 May 2023	7.00	3.50
13 April 2023	6.75	3.25

 

 

 

 

 

 

Inheritance tax (IHT)

The IHT nil rate band has been frozen at £325,000 since April 2009. It had been scheduled to begin to increase with inflation annually but has been frozen again until April 2026. The residence nil rate band has also been frozen at £175,000 for the same period.

2024 Spring Budget Measure

Agricultural property relief (APR) and woodlands relief has previously applied to relevant land located within the European Economic Area. This was necessary to comply with EU law. Additionally, APR has been available on land located in the Channel Islands or Isle of Man since the 1970s. From 6 April 2024, both reliefs will be restricted to relevant land located in the UK.

 

2024 Spring Budget Measure

The government intends to move to a residence-based system of IHT. This will be implemented no earlier than April 2025, and is currently under consultation. The policy document suggests there will be a ten-year period for new arrivals before worldwide assets become subject to UK IHT, with a corresponding ten-year tail for leavers.

 

2024 Spring Budget Measure

From 1 April 2024, personal representatives of estates will no longer need to have sought commercial loans to pay inheritance tax before applying to obtain a “grant on credit” from HMRC.

Business taxes and capital allowances

Umbrella companies

Umbrella companies typically employ contractors who work on temporary contract assignments. The company operates payroll, deducting employment taxes and NI contributions, and manages payroll compliance and administrative tasks for a fee, typically paid by the contractor. Many provide a valuable service and are completely legitimate.

However, there is perceived abuse and the government wishes to crack down on non-compliance in the umbrella sector. Following the recent consultation on tackling non-compliance in the umbrella company market, many had been expecting an update on further action in the Budget.

2024 Spring Budget Measure

New HMRC guidance will be published in Summer 2024 aimed at workers and other businesses who use umbrella companies.

 

Investment zones

The so-called tax sites that are located in investment zones (IZs) offer special tax advantages for a limited period. These include:

• Structures and buildings. Usually, the structures and buildings allowance (SBA) deduction is equal to 3% per annum of qualifying expenditure on buildings and structures, but for businesses in an IZ the SBA rate is 10% per annum.
• Plant and machinery (P&M). Companies, but not unincorporated businesses, can claim a first-year allowance on 100% of the acquisition cost of P&M that’s primarily for use in an IZ site.
• NI. Employers with a physical premises in an IZ are entitled to a zero rate of Class 1 (secondary) NI on wages up to £25,000 per employee per annum for new employees who spend at least 60% of their working time within the zone.
• Stamp duty land tax (SDLT).  Relief from SDLT is available on certain acquisitions of land and buildings within IZ sites.
• Business rates. New businesses, and some existing ones, can also access full business rates relief in designated IZs in England.

2024 Spring Budget Measure

To coincide with the Budget the government released details of six of the previously announced IZs:

• Greater Manchester
• Liverpool City Region
• North East of England
• South Yorkshire
• West Midlands
• West Yorkshire.

In addition, the IZ programme has now been extended from five to ten years in Scotland and Wales in line with the extension of the IZ programme in England.

 

Capital allowances - full expensing and 50% first-year allowance

Current rules allow companies to claim a full expensing allowance (a 100% first-year allowance (FYA)) for purchases of new plant and machinery (P&M) that would otherwise only qualify for the main pool rate of writing down allowances (18%).

Also under current rules, a 50% FYA is allowed for purchases of new P&M that would otherwise qualify for the special pool rate of writing down allowances (6%), for example, integral features, cars with CO₂ emissions in excess of 50g/km.

Full expensing and the 50% FYA are only allowed for companies subject to corporation tax.

The full expensing and 50% FYA were temporary allowances due to end on 31 March 2026.

2024 Spring Budget Measure

The Chancellor confirmed that the temporary full expensing and the 50% FYA will be made permanent instead of ending on 31 March 2026. 

 

Full expensing and 50% allowance for leased assets

Existing rules do not permit first year capital allowances for the cost of P&M bought by businesses for leasing. 

2024 Spring Budget Measure

The Chancellor also announced that full expensing and the 50% FYA will be extended to companies which buy new P&M for leasing, subject to conditions. This won’t be introduced immediately. No date has been set for when the change will become effective.

EMPLOYMENT

National living wage (NLW) and national minimum wage (NMW)

From 1 April 2024:

• the NLW increases from £10.42 to £11.44 per hour. This rate originally applied to workers aged 23 and over but it will be extended to also apply to 21 and 22 year olds from 1 April 2024
• the NMW rate for workers aged 18 to 20 will rise from £7.49 to £8.60 per hour
• the NMW rate for workers aged 16 and 17 increases from £5.28 to £6.40 per hour
• the NMW rate for apprentices aged under 19, or those aged 19 and over but in the first year of their apprenticeship, will increase from £5.28 to £6.40 per hour
• the daily offset for the provision of living accommodation for a worker increases from £9.10 to £9.99 per day.

 

Umbrella companies

Umbrella companies operate as an intermediary employer, typically for multiple individuals who work on temporary short-term assignments providing their services to various clients. HMRC is concerned that some umbrella structures lead to unfair tax avoidance and non-compliance. Following the recent consultation on how to tackle these the Chancellor confirmed there would be no new anti-avoidance legislation for now. Instead, HMRC will use its existing powers to more actively attack tax abuse, see section 2.1.

 

Non-UK domiciled employees

2024 Spring Budget Measure

From 6 April 2025 the foreign income and gains (FIG) rules will be introduced to replace the existing tax regime for non-UK domiciled persons. This will affect the tax status of some internationally mobile employees and correspondingly their UK employers.

Under the FIG rules, overseas workdays relief (OWR) will continue. This means a non-UK domiciled person coming to work in the UK who has not been UK resident for any of the three previous consecutive tax years, may be entitled to tax relief for earnings from overseas workdays in their first three tax years of UK residence.

OWR will continue to be allowed for taxpayers who are paid abroad for overseas workdays, where the earnings stay overseas and they claim the remittance basis of taxation. The earnings are only taxable in the UK to the extent they are remitted here.

No doubt HMRC will issue further guidance before April 2025 to employees and employers on how OWR will apply under the FIG regime.

VAT

 

Compulsory registration threshold

The VAT registration threshold has been frozen at £85,000 since 2017, with the deregistration threshold similarly held at £83,000. Due to inflation, this has brought more small businesses within compulsory registration for VAT. Of course, this also now includes complying with Making Tax Digital for VAT requirements.

2024 Spring Budget Measure

From 1 April 2024, the compulsory VAT registration threshold will increase to £90,000. The deregistration threshold will rise to £88,000. This might allow businesses with turnover just over the old £85,000 mark to deregister - though they should review expected turnover going forward to see whether this would be worthwhile.

 

DIY Housebuilders Scheme

The DIY Housebuilders Scheme puts those who build their own home in a similar VAT position to someone who buys a zero-rated home built by a developer. Despite the name, the owner does not need to undertake the work themself, e.g. they can engage a contractor to do it. The individual can claim a VAT refund on building materials and services if they are:

• building a new home in which they will live
• converting a building into a home
• building a non-profit communal residence, for example a hospice; or
• building certain types of property for use by a charity.

2024 Spring Budget Measure

From the date of Royal Assent of the Spring Finance Bill 2024, HMRC will have a new information power regarding claims. These powers are required since the introduction of digital claims in 2023, which replaced the need for original invoices to be sent wholesale. HMRC will have the additional power to request further evidential documentation after a claim has been submitted to validate it and carry out compliance checks. This reduces the potential risks of overpayment of VAT or invalid claims.

 

Taxi fares consultation

The landmark ruling in Uber Britannia Ltd v Sefton MBC 2023 would detrimentally affect many taxi and mini cab firms across the UK. Put simply, the judgment means that where cab firms act as agents for their drivers they’re likely to have to charge VAT on fares where previously they did not. If it were just extra admin and inconvenience for the cab firms and their drivers the government would have let matters take their course. However, the result would be a substantial rise in cab fares for the general public and so it has decided to take action.

2024 Spring Budget Measure

the Chancellor announced a consultation to find ways to avoid the adverse consequences for taxi firms and passengers. Until then HMRC will not pursue cab firms to register or charge VAT fares where they would only be required to do so as a result of Uber Britannia Ltd v Sefton MBC 2023.

 

PROPERTY TAXES

Furnished holiday lets

Generous tax breaks, including access to business property disposal relief, have been available to short-term residential property letting businesses if they meet the criteria to qualify as “furnished holiday lettings” (FHLs). The criteria relate to availability and occupation in each tax year.

2024 Spring Budget Measure

From April 2025, the FHL regime will be abolished. Short-term letting businesses will then be subject to income tax in the same way as landlords with long-term tenants. This means that, among other things, mortgage interest will no longer be a directly deductible expense, and relief will be given via the more restricted tax reducer.

From 6 March 2024, an anti-forestalling rule will apply to prevent the use of unconditional contracts to obtain a tax advantage under the existing rules.

 

Annual tax on enveloped dwellings (ATED)

The ATED is payable by non-natural persons that own high-value residential property situated in the UK.

A non-natural person is:

• a company or other corporate body (a company that owns property in its capacity as a trustee of a settlement is not subject to the ATED, although the beneficiary may be if it is a non-natural person)
•  a collective investment vehicle (such as a unit trust or an open-ended investment company); or
• a partnership which includes a company or collective investment vehicle as a partner.

Most residential property is owned by individuals (whether as occupier or landlord) but if owned by a company (or other non-natural person) the dwelling is said to be enveloped.

For 2024/25, the ATED charge is calculated in accordance with the following bands:

Property values	ATED charge
£500,001-£999,999	£4,400
£1m-£1,999,999	£9,000
£2m-£4,999,999	£30,550
£5m - £9,999,999	£71,500
£10m-£19,999,999	£143,550
£20m+	£287,500

 

            

 

 

 

 

 

 

 

Relief for freeports

A freeport is a designated area where goods arriving from overseas are not subject to tariffs unless they leave the freeport and move to other parts of the UK. The idea is that this can stimulate manufacturing and employment opportunities in deprived areas of the country.

Once tax sites have been established within the freeport area, relief will be available from stamp duty land tax (SDLT), subject to a control period of up to three years. The land acquired must be used in a qualifying manner, generally for the purpose of a commercial trade or profession. The relief will be given in proportion to how much of the chargeable consideration relates to qualifying freeport land, e.g. if it is 50% qualifying and 50% non-qualifying, half of the SDLT charge will be relieved. If more than 90% of the consideration relates to qualifying land, it will be treated as if it were 100%.

2024 Spring Budget Measure

The end date for the tax breaks in English freeports has been extended until 30 September 2031, and for Scottish green freeports and Welsh freeports to 30 September 2034.

There will also be an enhanced rate of structures and buildings allowance available in freeport sites.

Maps showing the precise areas designated as freeports are available here. 

 

Stamp duty land tax (SDLT)

The government has an overall aim to increase the housing stock in the market. As discussed above, FHL status is to be abolished. There are a number of changes to SDLT including modernising the legislation relating to social landlords, and allowing those using a nominee arrangement to purchase a legal interest in land to claim first-time buyer relief.

2024 Spring Budget Measure

Multiple dwellings relief applies where two or more dwellings are purchased together, whether in a single transaction or as part of a linked transaction. The relief is abolished from 6 March 2024, with the following caveats:

Where contracts exchange after that date, and the transaction completes before 1 July 2024, relief can still be claimed.

Where contracts were exchanged on or before 6 March 2024, relief can be claimed irrespective of the completion date - as long as no changes are made to the contract.

Note that as these changes apply to SDLT, they do not affect transactions in Wales or Scotland, though the devolved administrations may make equivalent measures at some point.

CAPITAL GAINS TAX

Annual exemption

The capital gains tax (CGT) annual exemption for 2024/25 is £3,000 for individuals and £1,500 for trusts.

 

Residential property disposals

Residential property is subject to CGT at higher rates than other assets. Up to and including 2023/24, the rates have been 18% or 28%, depending on the extent of any unused income tax basic rate band. This compares to 10% or 20% for other assets.

2024 Spring Budget Measure

For disposals taking place on or after 6 April 2024, the higher rate will fall to 24%. This is another measure aimed at encouraging those with second properties to sell to increase housing availability, as gains would generally not be covered by private residence relief.

Note that as furnished holiday let status will be available until April 2025, a disposal of an FHL business (including properties) could qualify for business asset disposal relief if it constitutes the disposal of the whole of a business if the disposal falls in 2024/25.

OTHER CHANGES

SME loan scheme 

The Recovery Loan Scheme (RLS) offers a 70% government guarantee on loans of up to £2 million in the UK except Northern Ireland where the cap is £1 million, subject to conditions. Businesses can use the finance for any legitimate business purpose, including managing cash flow, investment and growth.

2024 Spring Budget Measure

The RLS has been renamed the Growth Guarantee Scheme and will be extended until 31 March 2026.

 

Business rates

Empty property relief (EPR) operates by providing owners of empty non-domestic properties 100% relief for the first three months (six months for industrial properties). Full business rates liability applies thereafter. If the empty property is occupied again for a period of six weeks or more, it becomes eligible for another period of EPR if it falls empty again. Local rating authorities reported abuse of the EPR requalification period involving clearly artificial schemes.

2024 Spring Budget Measure

Changes will be made to prevent unfair use of EPR by landlords of commercial properties in England, with effect from 1 April 2024. Landlords with vacant commercial property should check eligibility to EPR under new rules with their local authority before claiming it from 1 April 2024.

 

Private company share trading

There will be a consultation on the proposed Private Intermittent Securities and Capital Exchange System. The exchange offers share trading in private companies in a less formal and less expensive alternative to full listing.   

The potential benefits for companies include the chance to grow, attract new investors and improve liquidity for existing shareholders.

The government is proposing to launch a test platform after gathering feedback from its consultation later in 2024.

 

Childcare

The Chancellor announced that the hourly rate childcare providers are paid to deliver the “free” hours offered for children aged nine months to four years will increase in line with the metric used at the 2024 Spring Budget for the next two years.