What small business owners need to know about the new 2024/25 tax year

The end of the 2023/24 tax year is fast approaching. Is your small business prepared for the changes that are coming in the new 2024/25 tax year?

Below is our round-up of some of the key changes coming in the new tax year that you need to be aware of.

Business owners will also be affected by changes recently announced by Chancellor Jeremy Hunt in his Spring Budget. You can find a detailed summary of the Spring Budget here.

When does the new tax year start?

The 2023/24 tax year ends on 5th April 2024. The 2024/25 tax year will then run from 6th April 2024 to 5th April 2025. 

What changes will affect my small business in the 2024/25 tax year?

From 6th April 2024, the following changes will come into effect:

Reduction in National Insurance for the self-employed

Self-employed people with profits above £12,750 will benefit from an overall reduction in National Insurance contributions (NICs).

The liability for the self-employed to pay Class 2 NICs has been removed and, as announced in the Spring Budget on Wednesday 6th March 2024, the main rate of Class 4 NICs has been cut from 9% to 6%.

Dividend allowance halved again

Last year, the tax-free dividend allowance was halved from £2,000 to £1,000. As of 6th April 2024, this allowance has been halved once again. Individuals who receive dividend income are now only entitled to £500 tax free.

Capital Gains Tax annual exempt amount reduced

As with the dividend allowance, the Capital Gains Tax annual exempt amount has been further reduced. From 2024, the annual exempt amount has been permanently fixed at £3,000 for individuals. This follows a reduction from £12,300 to £6,000 in 2023.

While the 2024/25 tax year doesn’t start until 6th April 2024, there are some additional changes that come into place as early as 1st April that small business owners also need to know about:

VAT registration threshold increased

The Spring Budget saw the VAT registration threshold increased from £85,000 to £90,000 to help more small businesses mitigate the administrative and financial burden of VAT.

National Minimum Wage increases

On 1st April 2024, the National Minimum Wage rates will increase. This includes the National Living Wage, which increases to £11.44 an hour (from £10.42) for people aged 21 and over.

Business rate changes

In his Autumn Statement, the Chancellor announced that the small business multiplier will stay frozen for another year, keeping it at 49.9p.

Hunt also announced an extension to the 2024/25 Retail, Hospitality and Leisure Business Rates Relief scheme. From 1st April 2024 to 31st March 2025, eligible, occupied retail, hospitality and leisure properties will be entitled to 75% relief on business rates, up to a cash cap limit of £110,000 per business.

If you’re considering finance to help your business grow in 2024/25, check your eligibility today for a business loan from Funding Circle in 30 seconds. 

07/03/24: While we want to help as much as we can, the information found here is provided solely for informational purposes and should not be considered financial or legal advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here. If you have any questions, please speak to your professional adviser or seek independent legal advice.