12th February 2025

As we approach the end of the 2024/25 tax year, finance experts from RIFT have outlined the key changes and updates you should be aware of, with a focus on how these adjustments may affect your finances. In particular, income tax receipts have risen consistently in recent years, and the UK tax landscape is undergoing some significant shifts.

The financial year ends on 5th April, and any new tax rates or allowances will come into effect from 6th April, alongside changes introduced in the Spring Budget.

RIFT’s analysis of government data highlights that tax receipts are at their highest in a decade, with HMRC receiving £268 billion in income tax receipts in 2023, a 5.7% annual increase since 2013. As a result, this year promises to be busy for HMRC, especially as many changes are set to impact individuals and businesses alike. Historical data shows that the volume of calls to HMRC's tax helpline during April is typically 12.8% higher than the monthly average for the rest of the year, and waiting times are often 25% longer.

Here are the nine key changes you should be aware of as we approach the 2024/25 tax year:

1. National Insurance Contributions (NIC)

From 6th April, the main rate of Class 1 employee NICs will drop from 10% to 8%, with the previous Autumn Statement cuts providing a 4p reduction in tax for an estimated 27 million workers. For working families with two earners each on an average salary, this could mean a saving of over £1,800.

Meanwhile, Class 4 self-employed NICs will also fall, from 9% to 6%, benefiting over two million self-employed taxpayers. These changes, combined with previous reductions and the abolition of Class 2 NICs, will save an average self-employed worker earning £28,000 around £650 per year from April 2024.

2. National Living Wage and National Minimum Wage Changes

The National Living Wage for those aged 23 and over will rise by 9.8%, from £10.42 to £11.44, starting 1st April. Additionally, the National Living Wage will be extended to include 21 and 22-year-olds, meaning nearly three million workers will benefit from this increase.

3. Dividend Allowance Reductions

From 6th April, the dividend income tax-free allowance will be halved, from £1,000 to £500. This will affect approximately 4.4 million individuals in the 2024/25 tax year. While 27% of those with taxable dividend income will be unaffected, those who are affected may see an average loss of around £155.

4. Business Rates in England

The business multiplier for business rates in England will remain frozen for another year, effective from 1st April 2024.

5. Pension Lifetime Allowance Abolished

The Pension Lifetime Allowance will be abolished from 6th April, alongside changes to clarify the taxation of lump sums and lump sum death benefits. This means that for many savers, tax-free lump sum entitlements will increase.

6. Capital Gains Tax Rates

The capital gains tax allowance will be reduced from £6,000 to £3,000 for individuals and personal representatives, although different rules apply for trustees. This will mean that individuals with gains exceeding the allowance will pay more capital gains tax. An estimated 260,000 individuals and trusts will now be subject to capital gains tax for the first time. For some investors, such as buy-to-let landlords, this reduction could result in a tax bill increase of up to £2,610.

7. ISA Limits Freeze

ISA limits will remain frozen at £20,000 for the 2024/25 tax year. The average person is expected to invest around £5,696 into ISAs, with the typical breakdown being £4,330 for a Cash ISA, £8,690 for a Stocks and Shares ISA, and £8,520 for an Innovative Finance ISA. New changes will also allow multiple subscriptions to ISAs of the same type within the same year, and savers will be able to make partial transfers between providers, enabling them to maximize returns. The average interest rate for Cash ISAs is currently around 2.43% (variable) or 4.51% (1-year fixed), with IFISAs offering returns between 4% and 10%.

8. Research and Development Merging with SME Schemes

From 1st April, the Research and Development Expenditure Credit scheme will merge with SME schemes, meaning that any eligible R&D expenditure will need to be claimed through the combined scheme.

9. Tax Refund Deadlines

You may be eligible for a tax refund if you've overpaid in the past four tax years. However, if you miss the claim deadline, the tax year becomes closed to claims. For instance, refunds for the 2019/20 tax year (ended 5th April 2020) must be claimed by 5th April 2024. For subsequent years, claims for 2020/21 must be made by 5th April 2025. Missing these deadlines could mean you lose out on your refund unless HMRC grants an “Extra-statutory Concession B41” under very specific circumstances, such as official error, which is rare.