What to think about at the start of the new tax year

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It’s out with the old and in with the new. The 2024/25 tax year started on 6 April – and to help you manage your money in the months ahead, here are a few things worth keeping in mind.

1. National Insurance has been cut – so you might save money

Currently employed? The government has cut employee National Insurance (NI) rates from 10% to 8%. It says this change, along with NI cuts that happened back in January, could see a person with a salary of £35,400 saving around £900 a year.

If you’re self-employed and earning profits of £12,570 or more in a year, you’ll normally pay ‘Class 4’ NI contributions. The rates for these have now gone down from 9% to 6%. Plus, self-employed people don’t need to pay ‘Class 2’ contributions anymore. 

All in all, these changes mean you could end up taking home a bit more money each month going forward.

Keep in mind the amounts you can earn before you need to start paying tax and NI have been frozen. And so have income tax thresholds. The result? As people’s pay rises, more people find themselves either paying tax or paying tax at a higher rate than they did before. If this happens to you, you might not actually feel the benefit of NI cuts on your finances. 

People earning between £26,000 and £60,000 in the current tax year are the ones who’ll be better off, says the Institute of Fiscal Studies.

2. You might be able to keep more child benefit this year

Got children? Previously, if you or your partner earned more than £50,000, you’d face the ‘High Income Child Benefit Charge’, which reduces the amount of child benefit you get. If one of you earned more than £60,000, you’d end up with no child benefit at all in your pocket.

But now, your child benefit will only start to go down if you or your partner earn over £60,000. And you’ll only lose it completely if one of you earns more than £80,000.

Even if the High Income Child Benefit charge affects you, it’s worth claiming child benefit anyway. This can help you get National Insurance credits, which can go towards your State Pension. 

Don’t forget, paying into a pension plan can potentially reduce your ‘adjusted net income’.  And if you manage to reduce this income to below £80,000, you could get some or all of your child benefit back.

3. Your ISA allowance will have reset

Planning to put money into an Individual Savings Account (ISA)? Everyone has an ‘ISA allowance’, which is the total you can put in across your ISAs in a tax year. Your allowance will have reset on 6 April, meaning you’ll be able to pay a total of £20,000 in across your ISAs before 5 April 2025.

Remember, people who are eligible can put £4,000 into a Lifetime ISA each tax year, which counts towards the £20,000 allowance. 

4. Capital gains and dividends tax allowances have changed

Let’s start with capital gains tax allowances. If you ‘dispose of’ an asset, you may need to pay capital gains tax on the profit. ‘Disposing’ can mean different things, so check out GOV.UK if you’re not sure. But to give an example, it could be selling a house that you’ve let out. In the previous tax year, you’d only have to pay the tax if your profits were above £6,000. But now you may need to pay if your profits are over £3,000.

You can earn ‘dividends’ when a company makes a profit and gives shareholders money back. In the previous tax year, you were able to earn £1,000 in dividend income before you needed to pay tax on it – known as your ‘tax-free dividend allowance’. But this has gone down to £500. Remember, you don’t pay tax on dividends you may get on shares in an ISA.

Now’s a good time to think about your financial goals

So there you have it – a few things that could impact your finances going forward.

It’s worth remembering these things when you’re looking at your household budget and working towards your financial goals. For example, if you do end up saving due to NI cuts, you might want to think about what you’ll do with the extra money. It could be something that you put away for the future.  

Or if you have an ISA, it’s worth planning out how much you’ll set aside for it over the next little while. 

Got a pension plan and figuring out how much you want to pay into it this year? Make sure you know how much can be paid into your plans in a tax year before a tax charge applies. 

 

The information here is based on our understanding in April 2024 and shouldn’t be taken as financial advice.

A pension is an investment. Its value can go down as well as up and it could be worth less than was paid in.

Standard Life accepts no responsibility for information in external websites. These are provided for general information.

Your own personal circumstances, including where you live in the UK will have an impact on the tax you pay. Laws and tax rules may change in the future.