The end of the tax year is typically a trigger for a flurry of financial activity. The hard deadline of 5 April inevitably sharpens minds on budgets, income, allowances and liabilities.

But with the dawning of a new day on 6 April comes the beginning of a new tax year. This is not only a chance for slates to be wiped clean but also a chance to give thought to incoming policy changes and how they might impact on your personal finances.

With several such changes flagged by the Chancellor in recent budgets, here we provide an overview of some of the key areas of change to look out for in the 2024/2025 tax year.

Pension allowances

Increase or removal of thresholds

A major announcement from the 2023 spring budget was the abolition of the Lifetime Allowance, which capped total pension saving at £1,073,100 before a charge was incurred. From 6 April, the LTA has been removed from tax legislation. However, echoes of the LTA linger. The maximum tax-free lump sum you can take from your pension is set at £268,275 (25% of the LTA) and the Lump Sum and Death Benefit Allowance – the maximum amount you or beneficiaries can take from a pension tax-free – is set at £1,073,100. Note: thresholds might be higher if protections apply.

Dividend allowance

Further decrease in tax-free limit

The annual tax-free allowance for dividend income has fallen sharply in recent years. From 6 April, the rate has halved again to £500. Dividend income over this amount will be subject to taxation at varying rates: 8.75% for basic rate taxpayers, 33.75% for higher-rate taxpayers, and 39.35% for additional-rate taxpayers. The fact that many more investors are likely to be caught in this situation only serves to underline the potential benefits offered by tax-free savings vehicles, such as ISAs and pensions.

Capital Gains Tax

Reduced allowance and new rates

Another allowance that has shrunk significantly in recent years is the capital gains tax (CGT) annual exempt amount. From 6 April, this drops to £3,000 from the previous level of £6,000. At the same time, the level of CGT that higher-rate taxpayers incur on property sales has been reduced from 28% to 24% (with no change to the 18% CGT rate applicable to basic-rate taxpayers).

National Insurance

Rates cut

National Insurance has been one of the main headlines in recent budgets, with different impacts for the employed and self-employed. For employees, the rate of Class 1 National Insurance contributions (NICs), having already dropped from 12% to 10% in January, fell again to 8% from 6 April. For the self-employed, the new tax year brings a reduction in Class 4 NICs from 9% to 6% (rather than the previously mooted 8%) while the requirement to pay Class 2 NICs has effectively been abolished altogether for those with profits above £12,570.

Child benefit

Charge threshold increased

As outlined in the spring budget, the new tax year brings a change to the threshold for the High Income Child Benefit Charge. Previously, families would start to lose benefit via a tapering system as soon as one parent earns over £50,000. This now starts at £60,000, with a 1% charge for every £200 earned over this threshold. Earnings of £80,000 or more mean all child benefit must be repaid through self-assessment. In addition, from 6 April the weekly amount for child benefit increased to £25.60 for the eldest child (or only child) and £16.95 for younger children.

It’s important to note that the complexities of each of the changes listed above will play out differently for every individual, meaning it can be helpful to seek out professional support from a financial adviser when looking to understand their true impact.

It’s also worth reiterating that this is not a definitive list. The new tax year also coincided with changes in everything from the energy price cap to childcare provision, the state pension, the minimum/living wage, and the VAT registration threshold.

With fluctuations across such a wide variety of financial matters, it might seem tempting to postpone thinking about them for another day. However, with robust planning it’s possible to get a clear view on how the land lies for you, helping avoid any unnecessary concern as next year’s deadline approaches.

The information contained within this communication does not constitute financial advice and is provided for general information purposes only. No warranty, whether express or implied is given in relation to such information. Vintage Wealth Management or any of its associated representatives shall not be liable for any technical, editorial, typographical or other errors or omissions within the content of this communication.