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New Tax Year: Key Changes You Should Be Aware of For 2024/25

New Tax Year: Key Changes You Should Be Aware of For 2024/25 - Right Wealth Management

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As we step into the new financial year, the UK’s Spring Budget 2024 introduces some pivotal changes affecting various financial aspects from pensions to investments and taxation. Here’s what you need to know:

1. Pension Reforms

One of the most significant changes starting April 6 2024 is that the Lifetime Allowance for pensions will no longer apply. Previously, this limit capped the amount you could save in your pension pot without incurring extra tax charges. Its removal potentially enhances your retirement savings strategy.

Additionally, the state pension will increase by 8.5%, with the new full state pension now at £221.20 per week. This adjustment is in line with the government’s commitment to maintain the triple lock on state pensions, ensuring growth aligned with wages, inflation, or 2.5%, whichever is highest.

2. Investments: Individual Savings Accounts (ISAs)

The annual ISA limits remain unchanged at £20,000. However, a new British ISA will soon introduce an additional £5,000 allowance for investments in UK equities and possibly corporate bonds, further diversifying investment opportunities. The government also plans to simplify ISA management, including allowing multiple ISAs in a single year and facilitating the transfer of funds between ISA providers.

3. National Insurance Contributions

A substantial reduction in National Insurance contributions marks another key financial shift. The main rate for employees drops from 10% to 8%, and for the self-employed, from 9% to 6%. This reduction comes right after the total removal of Class 2 NICs, giving people more money in their pockets and lowering the tax pressure for many.

4. Taxation Changes

  • Child Benefit Charge: The threshold for the High Income Child Benefit Charge increases from £50,000 to £60,000, potentially reducing the number of families affected by this charge.
  • Dividend Allowance: Reduction in the dividend allowance from £1,000 to £500, although dividend tax rates remain unchanged.
  • Capital Gains Tax: The annual exemption amount decreases from £6,000 to £3,000, impacting how much capital gain can be earned tax-free.

5. Value Added Tax (VAT)

The VAT registration threshold sees its first increase in seven years, rising from £85,000 to £90,000. This change aims to alleviate the administrative burden on small businesses and encourage business growth.

6. Regulatory Changes in Tax Advice

The government is set to enhance the regulatory framework within the tax advice market. This includes exploring mandatory membership in professional bodies and strengthening HMRC’s control over tax practice standards. These adjustments aim to ensure higher quality and reliability in tax services provided across the board.

The above changes highlight the government’s efforts to create a more adaptable and growth-focused economic setting. Since these updates impact many aspects of both personal and business finances, it’s really important to grasp how they might influence your financial planning.

Plan for Success: Schedule Your Financial Review Today

Navigating these changes can be complex. Book your discovery meeting today to discuss putting a plan in place to better manage your money and maximise your financial opportunities in light of the new tax year adjustments. Your financial well-being is our priority, and with expert guidance, you can make the most of these new opportunities.

How can we help?

Get in touch with our team to find out how we can provide you with financial peace of mind.