The current tax year started 6th April 2024 and ends 5th April 2025, bringing with it some important updates to UK tax rates, allowances and policies. So, whether you’re a self-employed solopreneur or you employ a team of staff, it’s important to make sure you’re prepared for the year ahead.
What has stayed the same for the 2024/25 tax year?
Before we take you through the key changes that might affect your business in the 2024/25 tax year, here are some things that have remained the same:
Personal Allowance and UK Income Tax
The Personal Allowance for UK Income Tax has stayed the same at £12,570. This means you still don’t need to pay tax on any personal income under this amount. If you are employed and self-employed at the same time, your personal income combines all of these earnings.
UK personal income tax rates remain the same too:
- The Basic rate: £12,571 to £50,270 – 20%
- The Higher rate: £50,271 to £125,140 – 40%
- The Additional rate: +£125,140 – 45%
UK Corporation Tax rates and thresholds
The thresholds and rates for UK Corporation Tax will also stay frozen for the 2024/25 tax year:
- Taxable profit of £50,000 or less – 19% (small profits rate)
- Taxable profit of £250,000+ – 25% (main rate)
Workplace pensions
There have also been no changes to workplace pensions for the 2024/25 tax year, which means the automatic enrolment earnings thresholds are the same.
- Earnings trigger for automatic enrolment – £10,000
- Lower level of qualifying earnings – £6,240
- Upper level of qualifying earnings – £50,270
Employers are still required to contribute a minimum of 3% of every eligible employee’s qualifying earnings into their workplace pension once they have been auto-enrolled.
Key changes for the 2024/25 tax year
So what changes will affect your business in the 2024/25 tax year? We’re here to help your business prepare for the new tax year (and beyond).
Here are the key changes you should take note of and if you’re not sure which ones apply to you, reach out to your accountant who should be able to steer you in the right direction.
The dividend allowance
The tax-free allowance for dividends has halved once again for the 2024/25 tax year. It is now set at a rate of £500, down from £1,000 in 2023/24.
However, if you receive dividends above the £500 allowance, the tax rates for 2024/25 remain the same as they were previously:
- Basic rate – 8.75%
- Higher rate – 33.75%
- Additional rate – 39.35%
The VAT registration threshold
The VAT registration threshold is now set at a new rate of £90,000 (increased from £85,000). This means it isn’t compulsory to register for VAT until your VAT-taxable turnover reaches £90,000.
If your business was already registered for VAT at the £85,000 but you’re consistently earning less than £88,000 in VAT-taxable profit, you are allowed to deregister. However, you will need to re-register once you reach the new £90,000 threshold.
National Insurance Contributions (NICS) lowered
From 6th April 2024, Class 4 NICs for self-employed people were lowered from 8% to 6%.
This means that if your profit is above the £12,570 personal allowance, you’ll be required to pay a lower rate of National Insurance on your profits.
Business rates
The Retail, Hospitality and Leisure Business Rates Relief scheme, which provides eligible, occupied retail, hospitality and leisure properties with a 75% relief, has been extended. This means you will now be able to get 75% off your business rates bills until at least 31st March 2025.
The cash cap limit of £110,000 per business remains the same. The small business multiplier is also frozen at 49.9p.
Capital Gains Tax
The Capital Gains Tax (CGT) annual exemption has been reduced to £3,000 from £6,000 for individuals. This is the amount of profit you can earn from the disposal of assets before you have to pay Capital Gains Tax.
Unfortunately, this is likely to mean that more individuals are will qualify to pay CGT on disposals made within a tax year.
Other key changes you might want to know about
Cash basis accounting
Cash basis is now officially the default method of accounting. You can still use the traditional accrual method if you prefer but you will need to manually select this.
State Pension changes
The State Pension has increased by 8.5% under the triple lock guarantee, which is a governmental commitment requirement to increase State Pensions by the highest of average earnings growth between CPI inflation or 2.5%.
The new State Pension rates are now:
- Full rate: £221.20 per week (was £203.85)
- Basic rate: £169.50 per week (was £156.20)
Statutory pay
Statutory Sick Pay (SSP) has been increased to £116.75 per week for qualifying employees. Statutory Maternity, Adoption, Paternity, Shared Parental, and Parental Bereavement Pay rates have all been upped to £184.03 per week.
What about employers?
If you’re an employer wondering how the 2024/25 tax year may affect you, here are a couple of key things you should be aware of:
National Minimum Wage
The National Minimum Wage (NMW) is now £11.44 per hour. This means employers are legally required to pay staff now less than this rate.
The updated Flexible Working policy
Up until now, employees only had the right to request flexible working after 26 weeks of continuous service.
However, as of 6th April 2024, the right to request flexible working will now apply from day one of employment. This applies to all employees.
Know your facts: Research published by ACAS showed that flexible working currently contributes around £37 billion to the UK economy every year, while refusal costs £2 billion.
Find more support and guidance for London-based businesses in our online information centre.