Exploring Tax Changes from April 2024: A Comprehensive Overview

Dividend Allowance - a further reduction

The Dividend Allowance will reduce to £500 per tax year from 6th April 2024.

The dividend allowance was £5,000 in tax year 2017/18 but has decreased steadily since then.

If you are basic rate tax payer or take up take profit up to the basic rate of tax as a director, you will not feel the impact greatly as the dividend allowance is relatively low at 8.75%.

However, if you a director who takes above the basic rate of tax from your company, the dividend allowance increaseds to 37.5% and you may want to review your income strategy from your business to make sure you are extracting profit as tax efficiently as possible.

Capital Gains Tax - a reduction at the higher rate for property investors but the CGT allowance is dropping

Capital Gains Tax (CGT) has to be paid when selling a property that is not your main home. At the March Budget 2024, the Chancellor announced a reduction in the higher rate of CGT of 28% to 24% from April 2024. The reasoning given by the Chancellor is that deal transactions, stimulating the sale side of the property market, and will generate more tax revenues.

The CGT allowance will however drop to £3,000 from April 2024, down from £6,000 in April 2023. The CGT rate for all other assets over £6,000 remains favourable at 10% basix rate and 20% higher rate, albeit they may rise in the future.

If you are therefore considering selling any assets that are liable for CGT, you may want to consider the timing of sale bearing in mind capital gains tax rates have been under scrutiny for a few years.

National Insurance - a further reduction for workers

The government decided to make a further cut to National Insurance at the March Budget 2024, which means that from April 2024, workers will pay 8% versus 12% the same time last year.

The good news is that the NI cut impacts workers and self employed across the country versus an income tax cut, which is a tax that is devolved in the UK, with the Scots and the Welsh setting their own rates.

This is a good result for everyone who pays National Insurance; however, if you a director who takes a tax efficient salary and dividends, you will not feel the impact of this tax cut.

The VAT threshold is increasing but only marginally

The VAT threshold is increasing to £90,000 in April 2024, up from the current threshold of £85,000., not a huge increase, but an increase nonetheless. Bear in mind that if the VAT threshold had increased in line with inflation, it would sit at the rate of c.£108K.