If you’re a UK landlord, sole trader, limited company director or side‑hustler, HMRC’s latest policy changes for 2024/25 reshape how you earn, save and report tax. This practical, plain‑English guide pulls the headline changes together and shows you what to do next so you keep more of what you make and stay compliant.
Key takeaways at a glance
– National Insurance cuts: most workers and the self‑employed see lower NICs from April 2024.
– Dividend and capital gains squeeze: allowances are smaller, and more people are brought into tax.
– VAT threshold rises to £90,000, easing pressure for some small firms.
– Making Tax Digital for Income Tax starts from April 2026 for higher‑earning landlords and sole traders—prepare early.
– Cash basis becomes the default for many unincorporated businesses from April 2024.
– Furnished Holiday Lettings regime to be abolished from April 2025—plan now if you run short‑term lets.
– Child Benefit rules eased from April 2024, with planning opportunities via pensions and salary sacrifice.
What’s new in 2024/25 (and what it means for you)
1) National Insurance cuts: more pay in your pocket
What changed
– Employees: The main Class 1 NIC rate fell to 8% from 6 April 2024 (down from 10% earlier in 2024 and 12% before that).
– Self‑employed: Class 4 NIC main rate reduced to 6% from 6 April 2024. Compulsory Class 2 NICs were abolished, though you can still pay voluntarily to protect your State Pension record if needed.
Why it matters
– Take‑home pay improves for employees and sole traders. Directors on payroll also benefit via PAYE.
Practical tips
– Employees/directors: Check your April payslip to confirm the 8% rate applied correctly; query discrepancies with payroll.
– Sole traders: Adjust Payments on Account—lower NICs may mean you’re overpaying. Ask your accountant to re‑estimate 2024/25.
– Protect your NI record: If profits are below the Small Profits Threshold, consider voluntary Class 2 to keep your State Pension years intact.
2) Dividend allowance cut to £500: review owner‑manager pay strategy
What changed
– The tax‑free dividend allowance dropped to £500 in 2024/25 (from £1,000 in 2023/24 and £2,000 before that).
Why it matters
– More of your company distributions are taxed at dividend rates (8.75%, 33.75%, 39.35% depending on your band). Many small company directors will pay more unless they adjust strategy.
Practical tips
– Rebalance pay: Re‑run salary vs. dividend calculations given lower NIC rates and the tiny dividend allowance.
– Use ISAs: Move shareholdings into ISAs where possible to shelter dividends. “Bed and ISA” over multiple tax years to use annual ISA allowances.
– Use two allowances: If you have a spouse/civil partner, consider transferring shares to use both allowances and lower‑rate bands (ensure settlements legislation isn’t breached and take advice).
– Pension contributions: Company‑funded employer pension contributions are usually corporation‑tax deductible and avoid dividend tax today (subject to allowances and rules).
3) Capital Gains Tax: lower allowance, property rate cut on higher band
What changed
– The Annual Exempt Amount fell to £3,000 from 6 April 2024 (from £6,000).
– The higher residential property CGT rate reduced from 28% to 24% from April 2024; the basic‑rate property CGT remains at 18%. Non‑residential rates are unchanged (10%/20%).
Why it matters
– More disposals now create a CGT bill due to the much smaller allowance. Property investors selling at a gain may pay less tax at higher bands than before, but far more people will be within scope due to the lower exemption.
Practical tips
– Stagger disposals: Spread sales across tax years to use multiple annual exemptions where possible.
– Harvest losses: Bank investment losses to offset current or future gains.
– Bed and ISA: Move assets into tax‑sheltered wrappers to limit future gains.
– 60‑day reporting: If you sell UK residential property at a taxable gain, file and pay within 60 days of completion via the UK Property Account—don’t wait for Self Assessment.
4) VAT registration threshold increased to £90,000
What changed
– From 1 April 2024, the VAT registration threshold rose from £85,000 to £90,000 (12‑month rolling turnover). The deregistration threshold moved to £88,000.
Why it matters
– Some growing businesses get breathing space before needing to charge VAT, while those just over the old limit may be able to deregister.
Practical tips
– Monitor the rolling 12 months: Don’t use calendar or tax years—use a proper rolling tracker.
– Pricing strategy: If you’re hovering near the threshold, model margin, pricing and customer impact of registering vs. managing growth.
– Review schemes: If registered, compare the Flat Rate Scheme, Cash Accounting, and standard VAT to optimise cash flow.
5) Making Tax Digital for Income Tax (MTD ITSA): phased start from 2026
What changed
– Landlords and sole traders must keep digital records and send quarterly updates under MTD ITSA, phased in as follows:
– From April 2026: individuals with total business and/or property income above £50,000.
– From April 2027: threshold drops to £30,000.
– Partnerships and those below £30,000 will follow later (timetable subject to future announcements).
Why it matters
– MTD changes how you keep records and interact with HMRC. Leaving software and process changes to the last minute risks penalties and poor data.
Practical tips
– Choose software now: Pick MTD‑ready bookkeeping tools that handle bank feeds, receipt capture and multiple properties.
– Clean data, clean tax: Reconcile monthly, keep digital copies of receipts, and separate personal and business banking.
– Quarterly rhythm: Treat quarter‑ends like mini year‑ends—review income, expenses and tax reserves.
– Jointly owned property: Ensure your software tracks split ownership and each owner’s share for reporting.
6) Cash basis becomes the default for many unincorporated businesses (from April 2024)
What changed
– The cash basis is now the default method for many sole traders and property businesses, with the option to elect out to accruals. Prior turnover caps and some restrictions were eased/removed.
Why it matters
– Cash basis can simplify records and may improve short‑term cash flow by taxing money when received and deducting when paid. But accruals can be better where timing differences, stock, large debts, or complex contracts are involved.
Practical tips
– Run the numbers: Model both methods for 2024/25 to see which yields the lower overall tax and smoother cash flow.
– Interest and losses: Understand how deductions and loss relief work under cash vs. accruals for your specific trade or property business.
– Switching: Keep a clear audit trail if you opt out of the default—consistency and documentation matter.
7) Basis period reform for trading businesses: tax year basis from 2024/25
What changed
– Sole traders and partnerships now use a tax year basis from 2024/25 (following 2023/24’s transition year). Accounting dates no longer drive the tax year’s taxable profits.
Why it matters
– If your year‑end wasn’t 31 March/5 April, you may have transitional profits spread over up to five years, affecting tax and cash flow.
Practical tips
– Align your year‑end: Consider moving to 31 March/5 April to simplify MTD, estimates and cash planning.
– Revisit Payments on Account: Transitional amounts can push up POA; review to avoid over‑ or under‑paying.
8) Furnished Holiday Lettings (FHL) regime abolished from April 2025
What changed
– From 6 April 2025, the FHL regime is set to end. FHLs will be taxed like other residential lettings, removing perks such as certain capital allowances treatment and specific CGT relief interactions.
Why it matters
– Short‑term let owners could face higher tax and fewer reliefs. Business Asset Disposal Relief and rollover relief treatment may no longer apply as before.
Practical tips
– Scenario plan 2024/25 vs 2025/26: Consider timing of disposals, major refurbishments, or refinancing before rules change.
– Structure review: Assess whether incorporation, joint ownership changes, or moving to longer‑term lets make sense (get advice before acting).
– Record keeping: Keep detailed availability and letting records for 2024/25—the final FHL year—to substantiate current reliefs.
9) Child Benefit changes: higher thresholds from April 2024
What changed
– The High Income Child Benefit Charge (HICBC) threshold increased to £60,000, with the charge tapering to zero by £80,000.
Why it matters
– More families can keep some or all of their Child Benefit, reducing effective marginal tax rates compared with prior years.
Practical tips
– Use pensions and salary sacrifice: Gross pension contributions and approved salary sacrifice (e.g., for pensions) can reduce adjusted net income below the thresholds.
– Don’t forget to claim: Even if you opt out of payments, submit the claim to protect your child’s NI credits.
10) Corporation Tax and R&D: plan around the 25% main rate
What changed
– The main Corporation Tax rate remains 25% (with a 19% small profits rate and marginal relief between bands). From April 2024, R&D reliefs moved toward a merged scheme, with a separate enhanced regime for R&D‑intensive SMEs.
Why it matters
– Effective tax depends on profit level and associated companies. R&D rules influence whether to claim under the merged scheme or the intensive relief.
Practical tips
– Watch associated companies: Grouping and common control can push you into higher effective rates—review structures.
– Capital allowances: Use full expensing (for qualifying companies) or AIA to accelerate relief on plant and machinery.
– R&D governance: Tighten documentation of technical uncertainty, competent professionals and qualifying costs to defend claims.
11) Pensions and ISAs: tax shelters still matter
What changed
– The Lifetime Allowance was abolished from 6 April 2024 and replaced by new lump‑sum based limits. ISA allowance remains a cornerstone of tax‑free saving.
Why it matters
– With dividend and CGT allowances shrinking, shelters like pensions and ISAs are more valuable to long‑term planning.
Practical tips
– Map your bands: Coordinate pension contributions to reduce higher‑rate exposure and HICBC, and to manage the tapering of the Personal Allowance where relevant.
– Max out ISAs early in the tax year to front‑load tax‑free growth.
Compliance dates you should pin to your wall
– 5 April: Tax year end—last chance for allowances and reliefs.
– 6 April: New tax year—reset your ISA and CGT allowances; update payroll and bookkeeping settings.
– 31 July: Second Payment on Account due (if applicable).
– 31 January: Online Self Assessment filing and balancing payment deadline for the prior tax year.
– 60 days from completion: CGT return and payment due on taxable UK residential property disposals.
– From April 2026/2027: MTD ITSA quarterly updates begin for qualifying landlords and sole traders.
Action plan: what to do this week
For landlords
– Review your property portfolio for potential disposals in light of the 24% higher CGT rate and the £3,000 AEA.
– Decide whether to stay with cash basis default or elect accruals—model interest, repairs and timing.
– Prepare for MTD ITSA: choose software that handles multiple properties and joint ownership shares; set up separate bank accounts per property business.
– FHL owners: scenario‑plan before April 2025. Consider timing of refurbishments, sales, or moving to longer‑term lets.
For sole traders
– Update bookkeeping to reflect cash basis default (or elect out). Set monthly aside for tax/NIC at the new 2024/25 rates.
– Recalculate Payments on Account after the NIC cuts to avoid cash being tied up unnecessarily.
– Get MTD‑ready: digitise receipts, reconcile monthly, and test bank feeds now.
For company directors/owner‑managers
– Re‑run your 2024/25 remuneration plan given the 8% employee NIC rate and £500 dividend allowance.
– Consider employer pension contributions to reduce Corporation Tax and personal dividend exposure.
– Review associated companies and profit levels to optimise marginal relief and capital allowances.
Five quick, practical tax‑saving moves
1) Increase pension contributions if you’re near higher‑rate bands or HICBC thresholds.
2) Maximise ISA subscriptions early; use spouse/partner allowances too.
3) Harvest capital losses to offset gains in a year of low CGT allowances.
4) Check whether cash basis or accruals yields a better result for 2024/25—and stick with it consistently.
5) Track turnover monthly to manage the new £90k VAT threshold and avoid surprise registration.
Stronger conclusion: act early, act deliberately
The 2024/25 tax year rewards proactive planners. Lower NICs are a welcome pay rise, but shrinking dividend and CGT allowances, the looming MTD ITSA regime, and the end of FHL reliefs demand attention. The winners this year will be those who shift income into tax‑efficient wrappers, pick the right accounting method, prepare systems for MTD, and make smart timing decisions on property and investments.
Don’t wait for the January rush. Block 90 minutes this week to review your remuneration, savings wrappers, property plans and bookkeeping setup. A short planning session—ideally with a qualified accountant—can be worth thousands in tax saved and penalties avoided.
Important
This article is a general guide to UK tax changes applicable to 2024/25 and policies announced up to that point. It is not personal tax advice. Tax rules change and how they apply depends on your circumstances—seek advice before acting.