It pays to be a tax-year early bird – here’s why…

As we enter the new tax year, it’s the perfect opportunity to set fresh goals – and make them happen! Here are the key changes for the 2024/25 tax year!

A new year marks new beginnings and a clean slate – so the start of the new tax year on 6th April 2024 is the perfect time to set some new personal and business goals.

And early use of the fresh tax allowances and exemptions could reap rewards – now and in the longer term – helping you achieve the future you want.

Amid the ongoing cost of living, using all available tax breaks while you have them will help your short- and long-term financial security and well-being.

Here’s a rundown of the main tax exemptions and allowances, and what has – or hasn’t – changed for the new tax year:

  • Your ISA allowance remains at £20,000 – this can be in a Cash or Stocks & Shares ISA, or a combination of both. Similarly, the Junior ISA allowance stays at £9,000 per child.
  • The Inheritance Tax (IHT) gifting exemption stays at £3,000. You can also use last year’s allowance if it was unused.
  • From April 2024, the Capital Gains Tax (CGT) exemption will be reduced to £3,000.
  • The tax rates on dividend income are set to remain at their current levels; however, from 6th April 2024, the Dividend Allowance will be reduced from £1,000 to £500.However, it’s worth keeping an eye on the proposed UK ISA, designed to enhance UK retail investment opportunities, giving savers an additional annual subscription allowance of £5,000.
  • Unused allowances on pension savingscan be carried forward, but only from the three previous tax years. Those wishing to maximise on this should consider fully utilising their annual allowance.
  • From 2024/25, the Pensions Lifetime Allowance (LTA) will be abolished, leaving a tax regime where you can take as much income as you want from your pension (albeit still subject to income tax) and checks will only be made on lump sums taken.

The Spring Budget

March’s ‘Budget for Long Term Growth’ could have implications for your future strategy – so, how can you leverage the changes for tax-efficient financial planning?

The Chancellor announced a cut to the rate of Class 1 employee National Insurance Contributions (NICs) from 6th April 2024, resulting in a 2% decrease from 10% to 8%. Similarly, the self-employed will benefit from a reduced Class 4 NIC rate (from 8% to 6%), presenting a tangible saving for many.

Two significant changes announced, in line with pre-budget expectations, were a radical reform to the taxation on non-domiciles and the abolition of tax breaks for furnished holiday lettings. Income derived from the latter, currently pensionable, will become property income, which isn’t. Therefore, maximising any savings in the 2024/25 tax year against this type of income should be considered.

Being a tax-year early bird

As the tax landscape becomes increasingly complex, engaging with a financial adviser to align financial goals with the evolving tax and economic context is more crucial than ever.

Everyone’s financial journey and situation is different, so creating a detailed financial plan to match your goals will make you feel confident and in control, meaning you can spring forward into the future – and embrace it!

If you’d like to find out more about the new tax year allowances, please get in touch.

The value of an investment with St. James’s Place will link directly to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

An investment in a Stocks & Shares ISA will not provide the same security of capital associated with a Cash ISA or a deposit with a bank or building society.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

Please note that Cash ISAs are not available through St. James’s Place and although anyone can contribute to an ISA for a child, only the parent/legal guardian can open the ISA for them.