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Personal Tax Changes - Spring Budget 2024

Income tax

Income tax rates

Income tax rates will remain unchanged. The basic rate will remain at 20%, the higher rate at 40% and the additional rate at 45% for 2024/25.

Income tax allowances

The income tax personal allowance (£12,570) and basic rate band (£37,700) are fixed at their current levels until April 2028. For those entitled to a full personal allowance, the point at which they will pay income tax at the higher rate will continue at £50,270. The personal allowance starts to be withdrawn for people with income exceeding £100,000, and is fully withdrawn at an income level of £125,140. Income above £125,140 is taxed at the additional rate. 

Dividends

The rates of taxation on dividend income will remain unchanged as follows:

  • the dividend ordinary rate - 8.75%

  • the dividend upper rate - 33.75%

  • the dividend additional rate - 39.35%.

As corporation tax due on directors’ overdrawn loan accounts is paid at the dividend upper rate, this will also remain at 33.75%.

The Dividend Allowance, the amount of dividend income on which no dividend income tax is payable, will reduce to £500 from 6 April 2024.

Savings

The Savings Allowance, the amount of interest income on which no income tax is payable, will remain at £1,000 for basic rate taxpayers, and £500 for higher rate taxpayers, from 6 April 2024.

Pensions

The pension allowance, the maximum that a taxpayer can contribute into a pension scheme, will remain at £60,000 each tax year. The Annual allowance is tapered where income exceeds £200,000 excluding pension contributions, or £260,000 including pension contributions.

National Insurance contributions

The Chancellor announced a significant change to National Insurance rates.

Employees and NICs

The government will cut the main rate of Class 1 employee NICs from 10% to 8% from 6 April 2024, for earnings between £12,570 and £50,270. This follows on from a 2% reduction in January 2024. The rate of Class 1 NIC on earnings above £50,270 will remain at 2%.

The self-employed and NICs

The self-employed generally have to pay two forms of NICs: Class 2 and Class 4.

Firstly, the government will cut the main rate of Class 4 self-employed NICs from 9% to 6% from 6 April 2024, on profits up to £50,270. The rate on profits above this level will remain at 2%.

Secondly, the government had previously announced that it would abolish Class 2 self-employed NICs from 6 April 2024. This means that, from 6 April 2024:

  • Self-employed people with profits above £12,570 will no longer be required to pay Class 2 NICs but will continue to receive access to contributory benefits, including the State Pension.

  • Those with profits between £6,725 and £12,570 will continue to get access to contributory benefits, including the State Pension, through a National Insurance credit without paying NICs.

  • Those with profits under £6,725 and others who pay Class 2 NICs voluntarily to get access to contributory benefits including the State Pension, will continue to be able to do so.

The government will set out the next steps on Class 2 reform next year.  

National Living Wage and National Minimum Wage

The new rates of National Living Wage for employees aged 21 and over will be £11.44 from 1st April 2024. The rates for under 18s and apprentices will be £6.40, and for employees aged between 18 and 20 the rate will be £8.60. The apprentice rate applies in the first year of an employee's apprenticeship. 

 

Individual Savings Accounts

The government is freezing the limits on Individual Savings Accounts (ISAs) (£20,000), Junior Individual Savings Accounts (£9,000), Lifetime Individual Savings Accounts (£4,000 excluding government bonus) and Child Trust Funds (£9,000) for 2024/25.

 

The Government announced that it plans to introduce further ISA options, including an additional £5,000 "British ISA" at a later date.

Capital Gains Tax

The annual exempt amount for Capital Gains Tax will reduce from £6,000 to £3,000 for the 2024-25 tax year.

The rate of Capital Gain Tax applying to capital gains from the disposal of residential property will reduce to 24% from 6th April 2024.

 

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