New year tax changes to be aware of

National insurance contributions

From this month (April), the national insurance rate was cut from 10% to 8%. This was in addition to a cut earlier in the year (January) from 12% to 10%.

Furthermore as of 6 April 2024, self-employed earners above £12,570 won’t owe class two national insurance contributions but will retain access to their state pensions.

Also from 6 April, the main rate of class four self-employed national insurance contributions will reduce from 8% to 6%.

Tax thresholds and allowances

Personal allowance is the amount you’re allowed to earn in a given tax year before you start paying income tax.

For the 2024/2025 tax year, personal allowance remains at £12,570 and it is expected to be frozen until 2028.

The higher rate of income tax threshold for this tax year remains at £50,270 and this is also expected to be frozen until 2028.

Moreover, the income tax additional rate threshold will stay at £125,140.

National living wage

While national living wage (NLW) and national minimum wage (NMW) are not technically part of the tax year changes, it could impact how you pay your employees over the new tax year and therefore, impact your taxes and payroll accounting.

The NLW increased to £11.44 for those aged 21+ on 1 April 2024. This also differs from previous years when it was 23 and over.

There have been further changes to the NMW for those aged 20 and under and apprentices.

Workplace pensions​

The new tax year sees no changes to the minimum amount employers need to pay into their employee’s auto-enrolment workplace pension.

VAT thresholds

From 1 April 2024, the VAT registration threshold increased from £85,000 to £90,000.