On Wednesday 6th March 2024, the Chancellor, Jeremy Hunt announced his Spring Budget to update the country on the fiscal plans ahead.
With an upcoming general election later this year, tax cuts were anticipated. As with every budget there are winners and losers, and this Spring Budget proved to be no different.
We go through all of the main announcements in the Spring Budget 2024 below with analysis of what they mean for you and your business.
Table of contents
- Personal Taxes
- What will the Personal Allowance be in 2024/25?
- How much do you need to earn to lose your personal allowance?
- What are the Income Tax Bands for 2024/25?
- What is the Optimum Directors Salary for 2024/25 tax year?
- What is the new Employees National Insurance Rate and how much will I save?
- What are the new National Insurance Rates for Self-Employed and how much will I save?
- What is the Marriage Allowance?
- What Taxes are Paid on Savings in 2024/25?
- What Taxes are Paid on Dividends in 2024/25?
- What is the Minimum Wage from April 2024?
- What are the Changes to Capital Gains Taxes?
- Company Taxes
- Other Announcements
Personal Taxes
The main personal tax announcements in the Spring Budget 2024 are below.
What will the Personal Allowance be in 2024/25?
Income below the personal allowance is earned tax free. The threshold of £12,570 has been frozen for another year. This was announced previously and is expected to remain at £12,570 until April 2028.
Ideally, the personal allowance would increase by inflation each year. By freezing the personal allowance more income becomes taxable. This is known as fiscal drag, which coupled with high inflation means more and more tax is payable.
As the personal allowance remains unchanged the tax code 1257L will also remain the most common for a taxpayer with a single employment.
How much do you need to earn to lose your personal allowance?
Earnings over £100,000 will reduce the personal allowance by £1 for every £2 earned.
As a result, for tax year 2024/25 when earnings exceed £125,140 there will be no personal allowance available.
What are the Income Tax Bands for 2024/25?
The income tax thresholds for 2024/25 remain unchanged as follows:
- Basic rate band remains at £37,700.
- The higher rate band is charged on income over £50,270.
- The additional rate band is charged on income over £125,140.
What is the Optimum Directors Salary for 2024/25 tax year?
The optimum directors salary for 2024/25 will remain at £12,570 per annum for basic rate taxpayers.
We recommend that directors pay themselves a monthly salary of £1,047.50. Then depending on their individual tax circumstances a further amount could be paid through the payroll as a bonus or as dividends.
For further information on this issue see our detailed guidance on the optimum directors salary.
What is the new Employees National Insurance Rate and how much will I save?
The main class 1 national insurance rate payable by employees is to reduce by a further 2%.
In January 2024, the rate reduced from 12% down to 10%. From 6th April 2024 it will be reduced down to just 8%, which will result in a total saving of over £900 for an average worker earning £35,400. Calculate your saving below:
What are the new National Insurance Rates for Self-Employed and how much will I save?
Self-employed workers pay class 2 and class 4 national insurance contributions.
Class 2 NI is currently £3.45 a week. This will be abolished from 6th April 2024. Those with profits under £6,725 who currently pay voluntary class 2 NI will continue to be able to do so.
Class 4 NI is payable on profits between £12,570 and £50,270 at the current rate of 9%. From April 2024 this will now reduce down to just 6%. Profits that exceed £50,270 will remain at the 2% rate. Calculate your saving below:
What is the Marriage Allowance?
The marriage allowance under certain circumstances allows a transfer of £1,260 of the personal allowance to their partner.
It can result in a tax refund of just over £250. Claims can be made for the previous 4 tax years.
Claims for the tax year 2019/20 will need to be made before 5th April 2024.
What Taxes are Paid on Savings in 2024/25?
There are no changes to the savings income allowances.
Basic rate taxpayers (total income under £50,270) receive a tax free allowance of £1,000. As a result no tax is payable on savings interest up to £1,000.
The tax free allowance on savings interest reduces for higher rate taxpayers to £500. A higher rate taxpayer has total income over £50,270 but under £125,140.
Additional rate taxpayers receive no savings allowance. A taxpayer with earnings in excess of £125,140 will pay tax on all of their savings interest.
What Taxes are Paid on Dividends in 2024/25?
The tax free dividend allowance will reduce from the current amount of £1,000 down to £500 for tax year 2024/25.
The dividend allowances and rates from April 2024 will be as follows:
- The first £500 of dividend income is tax free. This is available to all taxpayers.
- Basic rate taxpayers pay dividend tax of 8.75%.
- Higher rate taxpayers pay dividend tax of 33.75%.
- Additional rate taxpayers pay dividend tax of 39.35%.
N.B Dividends held in ISAs are not subject to dividend taxes. If you are taxed on investments consider utilising your ISA allowances.
What is the Minimum Wage from April 2024?
From April 2024 the national living wage will increase by 9.8% to £11.44. In addition, the age threshold is being reduced from 23 to 21 years of age.
There are also increases from April 2024 to the national minimum wage. The full list of age related hourly rates are as follows:
21 years and over – £11.44
18 to 20 years of age – £8.60
16 to 17 years of age – £6.40
Apprentices – £6.40
What are the Changes to Capital Gains Taxes?
The capital gains tax annual exempt amount from April 2024 will be just £3,000. This a further reduction from the current amount of £6,000.
As a result many more sales of assets will need to be reported to HMRC with capital taxes payable.
The capital gains tax rate remains at 10% for basic rate taxpayers and 20% for higher and additional rate taxpayers.
Residential properties are taxed at higher rates of 18% for basic rate taxpayers. From April 2024 higher and additional rate taxpayers will pay a tax rate of 24% on the sale of residential properties. This is a reduction of 4% on the current rate of 28%.
The sale of your home is not included as it qualifies for private residence relief.
Company Taxes
The main business tax announcements in the Spring Budget 2024 are below.
What will be the Corporation Tax Rate from April 2024?
The corporation tax rates will remain unchanged.
Companies with profits exceeding £250,000 will be taxed at the rate of 25%.
Profits under £50,000 will be taxed at the small profits rate of 19%. A marginal rate of tax is applied to profits between £50,001 and £250,000.
See how much corporation tax you will pay using our corporation tax calculator.
What is Full Expensing and what has changed?
Full expensing allows a business to claim 100% corporation tax relief on capital expenditure, such as plant and machinery. The tax relief is available in the year of purchase. In previous years the tax relief may have been dragged out over many years.
This relief was only available to assets purchased outright but has now been extended to include leased equipment.
It is only available to companies on the purchase of new assets and it excludes cars.
Small Limited companies typically claim capital allowances and the annual investment allowance. This remains in place and allows a business to claim 100% write off on certain assets up to £1 million per annum.
Unless you are spending in excess of £1 million on assets per annum your company is unlikely to benefit from full expensing.
How has the Spring Budget 2024 helped Small Companies?
Small companies have received very little help from the announcements in the Spring Budget 2024.
Retail, offices, hospitality and leisure businesses will welcome the continued business rates relief. The standard multiplier will be uprated in line with the consumer prices index from April 2024.
The main negatives for companies are as follows:
- Company taxes remain high including the 25% corporation tax rate.
- The reduction in National Insurance rates only impacts employees as the Employers NI rate remains at 13.8%.
- Businesses with lower paid employees may suffer with both the increase in minimum wage rates and the lowering of the qualifying age for the National Living Wage.
Historically, many businesses chose to incorporate due to the tax incentives available. After the increase in corporation taxes and the further reduction in self-employment NI rates there is now no incentive. The advantage of trading as a company is now mainly the Limited liability protection that a company provides.
Other Announcements
The main other announcements in the Spring Budget 2024 are below.
How has the High Income Child Benefit Charge changed?
Currently, anyone earning over £50,000 and receiving child benefit will need to pay back some of the benefit received.
From April 2024 the threshold increases so that child benefit is received in full if both partners earn under £60,000. The child benefit is then tapered where income is between £60,000 and £80,000. The benefit is withdrawn in full when either partner earns over £80,000.
The benefit will still be based on an individuals earnings. From April 2026, the intention is for the benefit to be based on household income.
What are the changes to Furnished Holiday Lettings?
Furnished holiday lets have tax advantages over longer term residential letting.
The tax advantages include claiming full mortgage relief on interest payments, claiming capital allowances on assets such as furniture, plus much more.
Unfortunately, for taxpayers who own furnished holiday lets, the tax adavantages are to cease. From April 2025 the tax rules will be the same as long term residential lets.
What is the new VAT Registration Threshold?
The VAT registration threshold had been frozen at £85,000 for many years. From 1st April 2024 the threshold will be raised to £90,000.
The deregistration threshold will also be raised from the current £83,000 to £88,000.
Further Information
For further information on the topics covered see HMRC Spring Budget 2024 announcements.
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