The UK’s new tax year brings some of the biggest HMRC shifts in years. Whether you’re a landlord, trades professional, sole trader, or a homeowner selling a property, these updates can put real money back in your pocket—or cost you—depending on how you respond. This guide breaks down the headline changes for 2024/25, what they mean in plain English, and the exact steps to take next.
Key takeaways at a glance
– National Insurance cut for employees and the self‑employed from April 2024
– VAT registration threshold increased to £90,000
– Cash basis becomes the default for most sole traders and landlords
– Basis period reform starts in 2024/25 (with a 2023/24 transition to manage)
– Making Tax Digital for Income Tax starts in 2026 for higher‑earning sole traders/landlords
– Child Benefit thresholds increased from April 2024
– Dividend and Capital Gains Tax allowances cut; but CGT higher rate on residential property reduced to 24%
– Furnished Holiday Lettings regime to be abolished from April 2025
– CIS and IR35 updates tighten compliance but fix double‑tax issues
– Platforms like Airbnb and Etsy now report seller income to HMRC (first reports by 31 Jan 2025 for 2024 data)
National Insurance: immediate savings for many
– Employees: The main Class 1 National Insurance rate fell to 8% from 6 April 2024 (after a cut to 10% in January 2024). If you’re on payroll, your take‑home pay should be higher from April onwards.
– Self‑employed: Class 2 contributions are effectively abolished for most with sufficient profits, and Class 4 NI drops to 6% from April 2024. If your profits are below the Small Profits Threshold, you may still want to pay voluntary Class 2 to protect your State Pension record.
What to do now: Check your April and May payslips or your first 2024/25 self‑assessment projection to confirm you’re benefiting from the cuts. If you’re self‑employed with low profits, speak to your accountant about voluntary Class 2.
VAT threshold rise to £90,000
From 1 April 2024, the VAT registration threshold rose from £85,000 to £90,000. The deregistration threshold increased to £88,000.
What it means
– If your rolling 12‑month taxable turnover is under £90,000, you can remain unregistered (or delay registering) longer.
– If you’re just over the threshold, review pricing, costs, and timing of invoices to avoid accidental registration.
– If you’re near £90,000 consistently, consider the pros and cons of voluntary registration—especially if your clients are VAT‑registered and can reclaim input VAT.
Practical tip: Track turnover monthly on a rolling 12‑month basis. Set automated alerts in your bookkeeping app for 80%, 90% and 95% of the threshold.
Cash basis is now the default for most sole traders and landlords
From April 2024, the cash basis becomes the default method for calculating profits for unincorporated trading and property businesses. Many previous restrictions and turnover limits have been removed.
What it means
– You record income when it’s received and expenses when paid, improving cash‑flow alignment and often reducing admin.
– You can opt out if accruals accounting suits you better (for example, if you carry stock, large work‑in‑progress, or have complex finance costs).
– For landlords, the simplified rules can be attractive, but you should model the impact if you have large financing costs or timing differences.
Practical tip: Ask your accountant to run a quick comparison of cash basis vs accruals for 2024/25 so you choose the most tax‑efficient method before your first return of the year.
Basis period reform: a big one for non‑April year‑ends
From the 2024/25 tax year, unincorporated businesses are taxed on profits that align with the tax year (to 5 April), regardless of their accounting year‑end. The 2023/24 year was the transition year: businesses with non‑tax‑year accounting dates bring extra months of profit into charge, use overlap relief, and can spread transition profits over up to five years.
Action points if your accounts don’t end on 31 March/5 April
– Gather your overlap figures now (your accountant can usually find them in historic returns).
– Decide whether to spread transition profits (reduces the immediate hit) or accelerate them (useful if you expect lower future rates or losses).
– Consider moving your accounting date to 31 March or 5 April to keep admin simpler going forward.
Making Tax Digital for Income Tax (MTD ITSA)
– From April 2026: Individuals with combined business and/or property income over £50,000 must keep digital records and send quarterly updates to HMRC.
– From April 2027: Threshold extends to those over £30,000.
– Partnerships and smaller incomes: timing still under review.
Practical tip: If you’re not already using cloud bookkeeping, start in 2024/25. Pick MTD‑ready software, standardise your invoicing, and set a monthly bookkeeping routine so quarterly reporting won’t be a scramble.
Child Benefit changes
From 6 April 2024, the High Income Child Benefit Charge threshold increased from £50,000 to £60,000, with the benefit fully withdrawn at £80,000 (instead of £60,000). The government intends to consult on moving to a household‑based system from 2026.
What to do now
– If you previously opted out due to the charge, reconsider claiming. You can receive the benefit and pay any charge via self‑assessment if needed.
– Check who in the household claims Child Benefit—this can affect National Insurance credits.
Dividend allowance and CGT annual exemption reduced
– Dividend allowance: Now £500 from April 2024 (down from £1,000 in 2023/24 and £2,000 previously). Company directors extracting profits via dividends will feel this most.
– CGT annual exempt amount: Now £3,000 for individuals and £1,500 for most trusts from April 2024 (down from £6,000 and £3,000).
Practical tip: For company owners, review your 2024/25 remuneration mix early—salary, dividends, pension contributions, and rent if applicable. For investors, consider using ISAs and pensions to shelter gains and dividends.
CGT rate cut on residential property (higher rate)
From April 2024, the higher Capital Gains Tax rate on residential property disposals fell from 28% to 24% (the basic rate remains 18%). This mainly benefits landlords and second‑home sellers. Private Residence Relief for your main home still applies as before.
Practical tip: If you’re planning a sale, run the numbers again under the new rate. Don’t miss the 60‑day CGT property return deadline after completion if a chargeable gain arises.
Furnished Holiday Lettings (FHL) regime abolished from April 2025
The FHL tax regime—offering perks like capital allowances and more flexible loss relief—is set to end from April 2025. Anti‑forestalling measures apply from March 2024 to prevent certain arrangements designed to lock in FHL benefits ahead of abolition.
What to do now
– Review forward bookings, pricing, and running costs—especially if you relied on capital allowances.
– Consider whether to keep letting as a standard property business, switch to long‑term lets, or divest.
– Factor in mortgage interest rules for standard residential lettings (generally 20% tax credit rather than full deduction for individuals).
CIS and IR35 updates you should know
– Construction Industry Scheme (CIS): From April 2024, HMRC strengthened the compliance tests for Gross Payment Status and increased the use of real‑time data checks (including VAT compliance). Expect closer scrutiny and faster GPS removal where there’s serious non‑compliance.
– IR35 offset fix: From April 2024, where a client is found to have incorrectly applied off‑payroll working rules, taxes paid by the contractor can be offset against the client’s liability—reducing double taxation in compliance settlements.
Practical tip: Contractors and engagers should refresh status determinations, audit payroll and CIS processes, and document decisions. For GPS holders, keep VAT, PAYE, and self‑assessment filings squeaky clean.
Online platforms now report your sales to HMRC
Under new international rules adopted by the UK, platforms such as Airbnb, Uber, Etsy, eBay and others must report sellers’ income to HMRC. The first UK reports are due by 31 January 2025 and cover 2024 activity.
What to do now
– Keep clean, separate records for each platform.
– Reconcile platform statements to your bookkeeping monthly.
– If you’ve been under‑declaring, consider a voluntary disclosure before HMRC contacts you.
Companies: permanent “full expensing” continues
If you trade through a limited company, the 100% first‑year allowance for main‑rate plant and machinery (“full expensing”) has been made permanent. A 50% first‑year allowance applies to special‑rate assets. Cars generally don’t qualify (except certain low‑emission vehicles via separate rules), but vans and most equipment do.
Practical tip: Time major purchases around profitability. Full expensing reduces taxable profits but doesn’t create or increase a loss—plan accordingly.
Practical, no‑nonsense tips by audience
For sole traders and tradespeople
– Move your year‑end: If you don’t use 31 March/5 April, consider switching to simplify basis period admin.
– Choose your accounting method: Ask your accountant to model cash basis vs accruals for 2024/25.
– Price for VAT reality: If your turnover is drifting toward £90,000, build a VAT strategy into quotes and contracts.
– Keep NI records tidy: If profits are low, decide on voluntary Class 2 for State Pension protection.
– Go digital early: Adopt MTD‑ready software now and set a monthly bookkeeping day.
For limited company directors
– Rebalance pay/dividends: With the dividend allowance at £500, revisit your blend of salary, dividends, employer pension contributions, and rent.
– Capital investment: Use full expensing where it aligns with profits and cash flow.
– Director’s loan accounts: Keep them clean—interest and s455 charges can bite if overdrawn.
– Consider spouses: Where appropriate and commercially justified, explore employing or making a spouse a shareholder (professional advice essential).
For landlords and holiday‑let owners
– Model FHL changes: Forecast 2025/26 without FHL perks; consider switching to long‑term lets or selling under the new CGT rate environment.
– Cash basis default: Review how this affects finance costs and timing of income/repairs.
– Record‑keeping: Track allowable expenses rigorously; keep receipts for repairs vs improvements.
– 60‑day CGT: If selling, diarise the 60‑day return and payment window.
For households and families
– Child Benefit: If your income fell between £60,000 and £80,000, re‑evaluate claiming and plan for any charge via self‑assessment.
– Pensions: Boosting pension contributions can reduce adjusted net income for Child Benefit and personal allowance tapering.
– ISAs: Use your annual ISA allowance to protect gains and dividends amid shrinking allowances elsewhere.
A simple 30‑minute action plan this week
– Check your accounting date and overlap relief position (5 minutes)
– Confirm payroll/self‑employed NI savings or voluntary Class 2 needs (5 minutes)
– Turn on VAT threshold alerts in your bookkeeping app (3 minutes)
– Decide whether to stick with cash basis or opt out (7 minutes)
– Book a 20‑minute call with your accountant to review Child Benefit, dividends/renumeration mix, and any planned property sales (10 minutes)
Common pitfalls to avoid in 2024/25
– Ignoring the 2023/24 transition for basis period reform and getting a surprise bill
– Missing the 60‑day CGT property return
– Hitting £90,000 turnover and failing to register for VAT on time
– Assuming FHL benefits still apply for 2025/26 plans
– Waiting until 2026 to go digital for MTD (start now to bed in systems)
Stronger conclusion: act now, keep more
HMRC’s 2024/25 changes create clear winners—if you plan. NI cuts improve take‑home pay, the higher VAT threshold gives micro‑businesses breathing room, and the CGT cut on residential property can sweeten a sale. But shrinking allowances, the end of FHL perks, and stricter compliance on CIS, IR35, and platform sales mean the margin for error is slim.
Here’s the bottom line: spend one focused hour this month to lock in the upsides and avoid expensive missteps. Choose the right accounting method, set VAT alerts, prepare for basis period reform, and map your remuneration or property plans under the new rules. Partner with a qualified adviser if anything here touches a nerve. A little proactive planning now can easily save you four figures—sometimes five—over the next year.
Important: This article provides general information, not tax advice. Tax rules change and your circumstances are unique—seek professional advice before acting.