Latest Updates on HMRC Tax Codes: What You Need to Know

Personal Allowance Increase

The personal allowance, which is the amount of income you can earn before paying income tax, has been increased for the 2024/25 tax year. The new personal allowance is set at £13,000, up from £12,570 in the previous year. This change means that you can now earn an additional £430 before you start paying income tax, providing some relief to low and middle-income earners.

Corporation Tax Rise

One of the most significant changes in 2024 is the increase in the Corporation Tax rate. The main rate of Corporation Tax has been raised to 25% for businesses with profits over £250,000. For businesses with profits between £50,000 and £250,000, a marginal relief rate will apply akpulse.com/, gradually increasing the effective rate from 19% to 25%. Companies with profits below £50,000 will continue to pay the small profits rate of 19%.

Dividend Allowance Reduction

The dividend allowance, which allows you to earn a certain amount in dividends before paying tax, has been reduced from £2,000 to £1,000. This change means that more individuals will be liable for dividend tax on their investment income. The dividend tax rates remain the same:

Basic rate: 8.75%

Higher rate: 33.75%

Additional rate: 39.35%

Capital Gains Tax (CGT) Threshold Adjustment

The annual exempt amount for Capital Gains Tax has been lowered from £12,300 to £6,000. This change significantly reduces the amount of profit you can make on the sale of assets such as property or shares before paying CGT. The CGT rates remain at 10% for basic rate taxpayers and 20% for higher and additional rate taxpayers. For gains on residential property, the rates are 18% and 28%, respectively.

Inheritance Tax (IHT) Threshold Freeze

The nil-rate band for Inheritance Tax, which is the threshold above which IHT is payable, remains frozen at £325,000 until April 2026. The residence nil-rate band, which provides additional relief for those passing on a main residence to direct descendants, also remains at £175,000. Any excess over these thresholds is taxed at 40%.

Introduction of a New Green Investment Tax Relief

To encourage investment in environmentally friendly projects, HMRC has introduced a new Green Investment Tax Relief. This relief provides a tax deduction for individuals and companies investing in qualifying green projects. The exact details and qualifying criteria are still being finalized, but this initiative aims to support the transition to a greener economy.

Digitalization of Tax Reporting

As part of the ongoing Making Tax Digital (MTD) initiative, HMRC is expanding the requirements for digital tax reporting. From April 2024, self-employed individuals and landlords with an annual income of over £10,000 will need to use MTD-compatible software to keep records and submit quarterly updates to HMRC. This change is intended to streamline the tax process and reduce errors.

 VAT Changes

The VAT registration threshold remains unchanged at £85,000 for the 2024/25 tax year. However, there are changes to the VAT rates for certain goods and services:

The reduced rate of 5% for hospitality, holiday accommodation, and attractions has been extended until March 2025.

A new zero rate has been introduced for certain energy-saving materials, such as solar panels and heat pumps, to promote energy efficiency.

Anti-Tax Avoidance Measures

HMRC continues to crack down on tax avoidance and evasion. New measures include stricter reporting requirements for offshore assets and increased penalties for non-compliance. These measures aim to ensure that everyone pays their fair share of tax and to close loopholes that allow some individuals and businesses to avoid paying taxes.

Conclusion

The HMRC tax code changes for 2024 bring a mix of increases, reductions, and new initiatives aimed at supporting economic recovery and promoting environmental sustainability. It’s essential to stay informed about these changes and understand how they may affect your financial situation. Whether you’re an individual taxpayer, a business owner, or an investor, consulting with a tax professional can help you navigate these changes and make the most of the available tax reliefs and allowances.