New Tax Year 2024/25

As the 2023/24 tax year concludes, it’s time to get  your ducks in a row:

• If it’s the first year you are required to file a self-assessment return you must register by 5th October  2024. We recommend registering as early as possible to ensure timely issuance of your Unique Taxpayer Reference (“UTR”) needed for filing by 31 January 2025.

• The second payment on account for 2023/24 for those already within the self-assessment system is due by July 31, 2024. Late payments accrue interest (currently at a rate of 7.75% per annum).

• The self-assessment return for the year ending 5 April  2024 must be filed by 31 January  2025 in order to avoid interest and penalties.  However, we recommend filing as early as possible in order to avoid the stress of the deadline, to find out sooner if you are owed a refund, or to give yourself time to pay the resulting liability.

Things to consider for the Tax Year 2024/25

• Tax rates and bands have remained frozen since 2021/22 and are currently set to remain frozen until 2027/28. This has brought more taxpayers into the tax bands, a concept known as “Fiscal Drag”. The worst affected are those earning between £100,000 and £125,140. The tapered loss of personal allowance once income exceeds £100,000 results in an effective rate of tax of 60% but there are some things you can do to mitigate this. Additional pension contributions and qualifying gift aid payments can be made to extend the tax bands and restore some personal allowance,  which if properly considered can alleviate the impact of the 60% tax rate on this band of income.

• Changes have been made to the rules on pension contributions. The maximum contribution for which tax relief is available (the pension annual allowance) has risen to £60,000 from £40,000 and the lifetime allowance has been abolished. “Catch up” contributions can be made if the full pension annual allowance was not utilised in any or all of the three previous tax years. This means that in 2024/25, if you have sufficient taxable earned income, a contribution of up to £200k can be made without incurring a tax charge if you have made no other pension contributions since April 2021.

• The Capital Gains annual exempt amount has been halved again, this time from £6,000 to £3,000 per year. However, gifts between spouses remain exempt from capital gains tax (“CGT”) and consideration can be given to gifting assets or parts of assets to a spouse prior to disposal in order that the couple can each utilise their annual exempt amount.

• For those considering making new investments it is worth noting that taxpayers can claim up to 30% income tax relief on EIS  qualifying investments, with up to £300,000 income tax relief available in the year of investment. Please note, investors have to hold the shares  for at least three years and the company must remain EIS-qualifying for three years. If not, the income tax relief is repayable to HMRC. The disposal of EIS shares is free of CGT when income tax relief has been claimed and not withdrawn by HMRC.

• Basic-rate (20%) taxpayers can earn £1,000 and higher-rate (40%) taxpayers can earn £500 in savings interest per year with no tax. Additional rate (45%) taxpayers are taxed on all savings income they receive.  However, interest arising in an ISA is tax-free and savers can put up to £20,000 per year into an ISA. Stocks and shares ISAs have similar tax benefits, with no Capital Gains Tax arising on disposals within an ISA and no tax due on dividends arising from shares within an ISA. The government also plans to introduce a new “British ISA” which will offer retail investors a £5,000 tax-free allowance on top of their existing annual £20,000 limit. This means a couple can save £50,000 tax free in ISAs each year.

• This tax year will be the last in which the non-domiciled remittance basis of taxation will apply. The government intends to abolish the “outdated” regime and introduce “a modern, simpler, fairer and competitive residence-based regime.”  There are expected to be transitional arrangements for those taxpayers currently resident in the UK but domiciled elsewhere, including a temporary 12% tax rate for previously unremitted income or gains. The draft legislation for the new regime is expected in Summer 2024 and we recommend that once the details are known, those taxpayers affected should reach out to discuss their options and for advice on maximising the benefits of any transitional arrangements available to them.

How can HNH Help?

At HNH, we offer comprehensive tax compliance services to ensure our clients’ self-assessment tax obligations are met efficiently and accurately. Our expertise extends from providing advice on self-assessment compliance to assisting with the registration process, guiding clients through every step seamlessly. We handle the preparation and submission of self-assessment tax returns, adhering to relevant regulations and maximizing potential reliefs, ensuring compliance and optimizing tax outcomes for our clients.

Our diverse clientele speaks to the breadth of our expertise and the trust they place in our services. From high-net-worth individuals seeking tailored tax solutions to shareholders of local and national corporations navigating complex tax structures, we cater to a wide range of clients. We also provide assistance to non-domiciled UK resident taxpayers, offering strategic tax planning advice to optimize their financial positions. Furthermore, local entrepreneurs benefit from our personalized guidance, ensuring their self-assessment tax obligations are managed efficiently, allowing them to focus on growing their businesses.

Our service offering also includes trust tax compliance, ensuring trustees fulfill their obligations accurately and efficiently. With meticulous attention to detail, we navigate the complexities of trust taxation, providing peace of mind to trustees and beneficiaries alike.

At HNH, we are committed to delivering exceptional service and expertise to all our clients.

Please contact any member of our tax team to discuss your requirements.