Personal tax changes from 6 April 2024

Personal tax changes from 6 April 2024

Apr 19, 2024

The start of the tax year will see the dividend allowance slashed, employee NICs cut and the high income child benefit cap raised

The dividend allowance will be cut to £500 on 6 April from the current £1,000. This will hit owner managed businesses particularly hard and will raise £455m in additional tax in 2024-25. An estimated 4.4m taxpayers are likely to be affected. The allowance was £2,000 in April 2022.

The annual exempt allowance for capital gains tax (CGT) is halved to £3,000 from the current £6,000. It is worth noting that the exempt amount has been cut from £12,300 just two years ago.

There will be a new reduced CGT rate for residential property sales set at 24%, against the usual 28% rate for higher rate taxpayers. The standard 18% rate is unchanged.

The rate of employee national insurance contributions (NICs) has been cut by a further 2% to 8%, the second reduction since January.

Combined with the 2% cut announced at Autumn Statement 2023, this will save the average worker on £35,400 over £900 a year.

This means basic rate taxpayers will pay a tax rate of 28%, compared to 32% on 5 January.

However, basic rate and higher rate tax thresholds remain frozen until 2028 at £12,570 and £50,271 respectively. This will pull more taxpayers into higher rate tax, with over a million expected to face 40% tax charges for the first time as a result. The additional tax 45% threshold remains unchanged at £125,140.

The income limit for married couples’ allowance increases to £37,000 from the current £34,600.

For two million self-employed people the main rate of Class 4 NICs is cut from 9% to 6% alongside the abolition of the requirement to pay Class 2 NICs – simplifying the tax system and saving an average self-employed person on £28,000 over £650 a year.

The high income child benefit charge (HICBC) will increase to £60,000 from the current £50,000.

The charge is tapered so if a parent or their partner, earns between £60,000 and £80,000 it may still be worth claiming.​

There is a 1% charge on child benefit for every £200 of income that exceeds £60,000. If income exceeds £80,000, the charge is equal to the amount of the child benefit payment.

Anyone who has opted out of child benefits due to HICBC can start getting them via the HMRC app or online.

Child benefit will increase from £24 to £25.60 for the eldest child, while the rate for other children rises to £16.95 from £15.90.

Families with one child will now receive up to £1,331 a year – an annual increase of £83.20, and up to £881 a year per additional child – an annual increase of £54.60.

State pension increases to £221.20 a week, up from £203.85, equivalent to £11,502 a year, approaching the basic rate tax threshold of £12,570.

There are also changes to working tax credit with the basic element rising from £2,280 to £2,435, and the couple and lone parent element up from £2,340 to £2,500.

On private pensions, the new lump sum allowance is set at £268,275, while the lump sum and death benefit allowance will be £1,073,100. There is no longer a lifetime allowance.

The annual tax on enveloped dwelling (ATED) charges will rise by 6.7% from 1 April 2024 in line with the September 2023 CPI. This will see the entry rate for properties worth £500,001 to £1m rises to £4,400 from £4,150, while properties over £5m to £10m increase to £71,500 from £67,050.