New Tax Year Changes 2024/2025

Apr, 2024

With the new tax year on the horizon, employers should be aware of the new rates, thresholds, and allowances in the 2024/2025 tax year.

The article below provides an overview of Income Tax, National Insurance, Minimum Wage increases, and statutory payments for the new tax year. This information will be beneficial as you prepare for your 2024/2025 payroll.

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.

National Minimum and Living Wage Rates 2024:

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:

CategoryRateValue IncreasePercentage Increase
National Living Wage (21 and over)£11.44£1.029.8%
18-20 Year Old Rate£8.60£1.1114.8%
16-17 Year Old Rate£6.40£1.1221.2%
Apprentice Rate£6.40£1.1221.2%
Accommodation Offset£9.99£0.899.8%

For more information on Minimum wage rates for 2024 visit GOV.UK.

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.

Scottish Tax Thresholds

From 6 April 2024, Scotland will introduce an ‘Advanced’ tax rate at 45% for an individual’s income between £62,431 and £125,140. Other Scottish tax thresholds have also been adjusted.

PAYE tax rateRate of taxAnnual earnings the rate applies to (above the PAYE threshold)
Starter tax rate19%Up to £2,306
Basic tax rate20%From £2,307 to £13,991
Intermediate tax rate21%From £13,992 to £31,092
Higher tax rate42%From £31,093 to £62,430
Advanced tax rate45%From £62,431 to £125,140
Top tax rate48%Above £125,140

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

Statutory paternity leave and pay is changing on 6th April 2024. Which will apply in all cases where the expected week of childbirth falls on or after 6th April 2024, allow paternity leave to be split into two blocks of one week at any point in the first year after the birth or adoption of their child.

In previous tax years, an employee taking Statutory Paternity Leave could choose to take either 1 or 2 consecutive weeks of leave and be paid either 1 or 2 weeks of SPP two weeks within the first eight weeks after birth.

Under the amended legislation, the notice period required for each period of leave has been shortened to 28 days, or four weeks, instead of 15 weeks before the expected week of childbirth. For further information Statutory paternity leave please visit GOV.UK.

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.

Find out more information click on the following link Holiday pay and entitlement reforms on GOV.UK.

Postgraduate Loans

From 6 April 2024, the repayment threshold for Postgraduate loans will be £21,000.

For further information on the above visit GOV.UK.