New financial year + new tax year = new rules

The new tax year 2024/25 begins later this week on 6 April 2024 after the new financial year 2024 commenced yesterday on 1 April 2024. 5 April 2024 is also the deadline to claim certain allowances and reliefs from the previous four tax years including claims for the marriage allowance which are still in time for the tax year 2019/20. Let’s take a look at some of the key tax changes which take effect.

R&D tax relief

Last month, Finance Act 2024, Schedule 1 (Research and Development) (Appointed Day) Regulations 2024 was published and appointed 1 April 2024 as the day when Schedule 1 of Finance Act 2024 will come into force (i.e. applying to accounting periods beginning on or after 1 April 2024). This schedule introduces the merged R&D tax relief scheme in addition to the additional relief available for loss-making R&D-intensive SMEs via a higher rate of payable tax credit.

National Insurance Contributions (“NICs”)

As announced in the recent Spring Budget, from 6 April 2024, the following changes to the rates of NICs will take effect:-

• The main rate of Class 1 employee NICs will reduce from 10 percent to 8 percent; and
• NICs rates for the self-employed across the UK will reduce to 6 percent from 9 percent as a result of a combination of the 2 percent cut announced in the Spring Budget 2024 and the 1 percent cut announced at Autumn Statement 2023.

From 6 April 2024, self-employed individuals with profits above £12,570 will no longer be required to pay Class 2 NICs but will continue to receive access to contributory benefits including the State Pension.

Anyone with profits between £6,725 and £12,570 will continue to get access to contributory benefits including the State Pension through a National Insurance credit without paying NICs, as they do currently, and those with profits under £6,725 and others who pay Class 2 NICs voluntarily to get access to contributory benefits including the State Pension, will continue to be able to do so.

HMRC would like to remind agents/taxpayers that taxpayers who are in self-assessment for reasons such as receipt of rental income or they are subject to the High Income Child Benefit Charge, and who, at a later date, become self-employed or become a partner in a partnership are still required to register with HMRC for Class 2 NICs. This will ensure that from 6 April 24, if you meet the above profit thresholds, Class 2 contributions will be treated as having been paid to protect your National Insurance record. Alternatively, if profits are under £6725 you will have the opportunity to voluntarily pay Class 2 contributions to avoid gaps in your National Insurance record. An article on this features in the most recent Agent Update.

Miscellaneous

The highlights from a range of other changes are set out below:-

• The dividend allowance will reduce to £500 from £1,000 from 5 April 2024;
• From the same date, the capital gains tax annual exemption will reduce from £6,000 to £3,000;
• From 1 April 2024, the rate of Plastic Packaging Tax increased in line with the Consumer Price Index;
• From 1 April 2024, both the national living and minimum wages were increased;
• The cash basis becomes compulsory for all unincorporated businesses from 6 April 2024; and
• From 2024/25, the tax year basis becomes the basis of assessment for all unincorporated businesses.