New Tax Year Changes 2024-25
National Insurance (NI) Changes:
On 6th March, Chancellor Jeremy Hunt announced a 2p cut to the main rate of employee National Insurance, reducing it from 10% to 8%, effective 6th April 2024.
Combined with the previous 2% reduction announced in the November 2023 Autumn Statement, which took effect in January, this will save the average worker earning £35,400 over £900 a year.
The government is also cutting a further 2p from the main rate of self-employed National Insurance, in addition to the 1p cut announced in Autumn Statement 2023.
This means that from 6th April 2024, the main rate of Class 4 NICs for the self-employed will now be reduced from 9% to 6%. Combined with the abolition of the requirement to pay Class 2, this will save an average self-employed person on £28,000 around £650 a year.
The government has accepted the Low Pay Commission’s recommendations for National Living Wage (NLW) and National Minimum Wage (NMW) rates, effective from pay periods beginning on or after 1st April 2024. The NLW for those aged 21 and over will increase to £11.44, marking a 9.8% rise.
The rates which will apply from 1st April 2024 are as follows:
Category Rate Value Increase Percentage Increase
National Living Wage (21 and over) £11.44 £1.02 9.8%
18-20 Year Old Rate £8.60 £1.11 14.8%
16-17 Year Old Rate £6.40 £1.12 21.2%
Apprentice Rate £6.40 £1.12 21.2%
Accommodation Offset £9.99 £0.89 9.8%
Dividend Allowance
From 6 April 2024, the Dividend Allowance will reduce from £1,000 to £500. Tax rates on dividend income will remain the same.
This measure reduces the tax-free allowance for dividend income (the ‘Dividend Allowance’) from £2,000 to £1,000 from 6 April 2023 and then to £500 from 6 April 2024 for individuals who receive dividend income.
Personal Allowance
The income tax personal allowance remains frozen until April 2028.
The Personal Allowance (PA) and basic rate limit will be fixed at their current levels up to and including 2027 to 2028 tax year. It will set the PA at £12,570, and the basic rate limit at £37,700 for tax years:
2026 to 2027
2027 to 2028
The Primary Threshold (PT) for Class 1 NICs, the Lower Profits Threshold (LPT) for Class 2 NICs and Lower Profits Limit (LPL) for Class 4 NICs will remain aligned with the Personal Allowance for Income Tax for these years.
The higher rate threshold (the PA added to the basic rate limit) will be £50,270 until 5 April 2028.
The NICs Upper Earnings Limit (UEL) and Upper Profits Limit (UPL) will remain aligned to the higher rate threshold at £50,270 for these years.
Paternity Leave
The UK government has implemented significant adjustments to parental leave rights to enhance the balance between work and family life. These modifications are outlined in the Paternity Leave (Amendment) Regulations 2024, effective from 8 March 2024, accounting for a 28-day notice period. The focus is on enabling new fathers or partners to take time off upon the birth or adoption of a child.
The main changes are:-
Splitting Paternity Leave
Starting from April 6, 2024, fathers or partners have the option to divide their paternity leave into two separate one-week periods during the first year after the baby's arrival. Previously, they were required to take one or two consecutive weeks off within the initial eight weeks following the birth or adoption.
Giving Notice to your Employer
There has been a reduction in the notice period that fathers or partners must provide to their employer. They now only need to give 28 days' notice instead of the previous 15 weeks. Additionally, they can adjust their leave dates with the same 28 days' notice, providing them with more flexibility.
Impact on Employers and Employees:
With the implementation of the new regulations, employers must update their policies and ensure that staff are informed about these modifications. For individuals expecting a baby after April 6, 2024, understanding these fresh guidelines is crucial to maximize the additional flexibility provided.
Holiday Rules for Irregular Workers
The Government has made changes to the Working Time Regulations relating to holiday entitlement and holiday pay calculations. For leave years starting on or after 1st April 2024, employers can choose to use rolled-up holiday pay. This applies to irregular hours workers and part-year workers only.
Employers should inform the employee if they’re planning to use rolled-up holiday pay. Introducing this might involve changing your employment contract. There are procedures an employer must follow if they’re changing the terms of staff contracts.
Postgraduate Loans
From 6 April 2024, the repayment threshold for Postgraduate loans will be £21,000.