“Crikey!” was the response of a fund manager to the financial events of recent weeks. It’s hard to find a better, simpler way to describe things at the moment.
So, I think it’s best to stick to one T word in this note – Taxes!
The main purpose of this note is to let you know that we are ready to begin work on your 2024-25 tax return, which we hope will act as a prompt to get your papers ready sooner rather than later.
In this note I will cover some key aspects to consider in the 2024/25 tax return, and the main changes introduced by Rachel Reeves in her autumn statement.
I will also highlight some topics of interest – the introduction of Making Tax Digital for Income Tax from April 2026, the state of play at HMRC, the higher rates of interest being used by HMRC, changes to the Trading Allowance and the taxation of ‘side hustles’.
In terms of UK taxes, we enter the 2024/25 filing season with a mix of tax policy – one set by the Sunak & Hunt government and then one adjusted mid-year by the new Starmer & Reeves government. The main changes for personal tax from both were in respect of Capital Gains Tax – starting with one lowering the threshold, followed by the other increasing rates.
Income Tax rates and thresholds remain unchanged, so the theme of the last few years continues – as incomes rise, more tax will be payable. Please look back at the “Unchanged Thresholds and ‘Fiscal drag’ section from last year’s note for details of that.
Planning for your 2024-25 Tax Return
Our Request for Information for your 2024-25 Tax Return
We will soon be sending out checklists to most clients for the preparation of papers for the 2024-25 tax return.
The tax-free Personal Allowance remains at £12,570, after which income is taxed at the basic rate of 20% up to £50,270. The Higher Rate tax of 40% applies up to £125,140, after which income is taxed at 45%. The Personal Allowance begins to be lost at £100,000, until it is all lost once taxable income reaches £125,140. Between £100,000 and £125,140 the marginal rate of tax on income is either 60% or 53.75%.
Similarly to the loss of Personal Allowance, the Higher Rate Child Benefit Tax Charge has been a charge introduced at a threshold level on those affected, initially at £50,000. From April 2024 the point at which Child Benefit is withdrawn, has risen to £60,000 and the upper threshold has risen to £80,000, meaning that the point at which all Child Benefit is completely lost rises from £60,000 to £80,000.
The Dividend Allowance has been reduced from £1,000 in 2023/24 to £500 in 2024/25.
The main changes are in respect of Capital Gains Tax. The threshold at which Capital Gains is applied has fallen from £6,000 in 2023/24 to £3,000 in 2024/25. In addition to that, the higher rate of capital gains tax on gains on shares was raised on 31 October 2024 from 20% to 24% – the same level as higher rate capital gains on the sale of residential property. That means two different rates in the same tax year, which will be a challenge for tax return software and for the HMRC infrastructure.
The state of play at HMRC – again
HMRC remains an organisation in crisis. Last year I talked about HMRC being in a vicious circle – on one hand, looking to roll out digital services to reduce the dependency on the user helplines, but on the other hand being unable to reduce the backlog of queries on those helplines to free up staff.
The situation was not helped by a denial by Sir Jim Harrah, head of HMRC, that calls to the helpline were cut off by HMRC before answering. Based on my experience that is definitely not the case.
After analysis and lobbying by accountancy regulators, there has been recognition of the problem, and steps to improve the situation. A new personal tax query resolution service for HMRC registered agents (such as Raymond Carter & Co) launched on 31 March 2025.
This should help in one of the most frustrating areas, where an agent raises a query that cannot immediately be resolved, because there is no transparency of how issues are escalated within HMRC.
Where registered agents have shown that no reply has been received from HMRC within their own “where’s my reply” tool deadlines, and where the agent has tried to resolve the query by contacting HMRC’s agent dedicated line or webchat on at least two occasions, then the new service can be used, which should speed up the resolution of these complex queries.
To use the service, agents will need to email a dedicated mailbox. HMRC will respond by making contact within 48 hours to acknowledge the query, then provide an update every five working days by telephone; and will try to resolve the query within 20 working days. If it cannot do this, HMRC will make an action plan to resolve the query.
It is a step in the right direction but, in reality, it will take years for HMRC to right itself.
Making Tax Digital for Income Tax ‘ITSA’ – It’s finally coming, no really!
In the October 2024 Autumn statement and the recent Spring statement, more detail on the roll-out of Making Tax Digital for Income Tax was provided and, this time, we do seem to be past the point of no return.
The scale of the introduction has been reduced from the original plan, where anyone who is Self-Employed or owning a rental property would be in scope. Instead, the introduction will be gradual as shown in the table below:
| Tax Year | Start of new reporting | Qualifying Income Threshold | First Quarterly Reporting deadline |
| 2026-27 | 6th April 2026 | £50,000 | 7th August 2026 |
| 2027-28 | 6th April 2027 | £30,000 | 7th August 2027 |
| 2028-29 | 6th April 2028 | £20,000 | 7th August 2028 |
For those in scope you will be required to file quarterly reports in a digital format within five weeks of the end of each quarter. A final year end declaration – similar to the current Self-Assessment tax return – will close the tax year.
For those who file quarterly VAT returns the filing requirements are similar. For property landlords with income above £50,000, this will be a new process and will inevitably be more time-consuming.
The software houses are ready, and pilot testing has started. We will be notifying clients who will be in scope for the 2026/27 tax return in the coming weeks, as it will be a fundamental change in preparing and completing the return.
Companies House changes
In last year’s update, I noted that Companies House introduced a number of changes which affected Company directors and owners – with slightly more disclosure on the annual Confirmation Statement, and higher compliance costs.
We are about to see further changes. Raymond Carter & Co have just registered as an “Authorised Corporate Service Provider” (ACSP), which enables us to continue to make Companies House filings on behalf of our clients.
As an ACSP, we will be required to be based in the UK, be registered with a UK supervisory body for anti-money laundering (AML) purposes – in our case the ICAEW – and to retain records of identity verification checks.
The changes required here are not just for accountants and agents. Directors and Company Secretaries will be affected too. Over the course of the next 18 month or so, Companies House will be able to:
- make identity verification a compulsory part of incorporation and new appointments for new directors and PSCs
- begin the 12-month transition phase to require more than 7 million existing directors and PSCs to verify their identity – the identity verification will happen as part of the annual confirmation statement filing, scheduled to start in the autumn of 2025, but with no date specified yet
- make identity verification of the presenters a compulsory part of filing any document
- require third-party agent firms filing on behalf of companies to be registered as an ACSP
What means is that the criteria for setting up a limited company is the same as setting up a bank account, which seems to make sense. The UK Government has set up a new process for Digital ID Verification – the GOV.UK ONE login – and that will be the key tool needed in this process. GOV.UK ONE will be available as an App, where Limited Company Directors will be able to verify documents, such as Driving Licences and Passports with a biometric chip.
https://www.gov.uk/using-your-gov-uk-one-login/proving-your-identity
Tax changes for 2024-25 and Beyond
We published a blog immediately after the Autumn statement made by the new Chancellor Rachel Reeves in October 2024. One of the main measures introduced is in respect of Employer National Insurance.
Employer National Insurance Rate Changes for 2024/25
The rate of Employer National Insurance has risen from 13.8% to 15% from 6th April 2025. As well as that, the threshold at which this higher rate applies has fallen from £758 per month (£9,100 per year) to £417 per month (£5,000 per year).
Both of these are indicators that employers will have more National Insurance to pay. On the other hand, the Employment Allowance has risen from £5,000 to £10,500, which might lessen or remove the impact of the rate and threshold increases for some small businesses.
Many of our clients who have owner-managed limited companies, will be familiar with the “optimal director salary”, which has been at £12,570, provided there are profits in excess of that level, and the owner is happy to accept a monthly employer National Insurance charge of £40. That charge is based on the difference between the Personal Allowance threshold of £12,570 and the Employer National Insurance (or “Secondary”) threshold of £9,100. It remains beneficial because the employer national insurance is a Corporation Tax deductible expense, as the Corporation relief (at 19%) is higher than the Employer NI rate of 15%.
That Secondary threshold is now only £5,000, but the optimal salary cannot be lowered to that level, without losing the annual qualification for the State pension, yet another threshold, known as the Lower Earnings Limit, which is set at £6,500 for 2024/25. The optimal director salary remains at £12,570, even with a higher monthly payment of £94.58 (up from £39.95), provided there are profits in excess of £13,704.
HMRC and Bank Interest
It is not a well known fact, but banks are required to report bank interest to HMRC for non-ISA UK bank accounts. Banks will hold National Insurance numbers for customers and HMRC can link that bank interest with pension and employment income they have.
The tax collection process is reasonably straightforward in theory. If HMRC believe that tax is owed, they can send a demand for tax via a P800 letter or they can adjust PAYE Coding to collect tax owed from earlier years. More people are seeing PAYE Coding adjustments for the collection of tax on bank interest as interest rates on savings have been higher in the last couple of years.
What is odd though is that for those who report the tax via Self-Assessment, HMRC do not yet appear to correct Self-Assessment tax returns for inaccurate bank interest reporting. The reason for that is that the current Self-Assessment process uses the Unique Tax Reference as the primary identifier, rather than the National Insurance number. There is no link, as far as I am aware, between the infrastructure collecting bank interest data and the Self-Assessment infrastructure.
So it appears we have two different processes – a ‘push’ for those in Self-Assessment, where the onus is on the taxpayer, and a ‘pull’ for those not in Self-Assessment where HMRC can demand additional tax.
Property Rental notification to HMRC and “Nudge” letters
In 2024, HMRC introduced rules requiring digital platforms to report details of operators renting out properties and earning rental income to HMRC. Following on from that, HMRC should be contacting individuals who are renting out properties but are not registered for Self-Assessment to ask whether they should be reporting income to HMRC via Self-Assessment. If income from that source is more than £1,000 then it is highly likely that those renting out property should be reporting that income.
For those prompted by HMRC, any tax owing for dates up to 5 April 2024, will also be subject to interest and penalties for late reporting. Those with rental income who report late but unprompted by HMRC, will still be subject to interest but lower penalties.
The Trading Allowance and Side Hustles
The digital reporting requirements for online platforms doesn’t just impact rental platforms like Airbnb. Online sales platforms like eBay are also in scope, and it is important to understand the updated tax implications of buying and selling on online platforms for individuals and businesses with small turnover, sometimes known as secondary income, and more popularly “side hustles”
For several years, there has been a Trading Allowance, which means that if total sales from such trading is less than £1,000, that income does not need to be reported to HMRC.
In March 2025, it was announced that the Trading Allowance would be raised to £3,000. However, that does not mean the tax-free allowance has risen to £3,000. There is no need to report via Self-Assessment, but HMRC will introduce a tool to report income of up to £3,000 – the due date for this change has yet to be announced.
HMRC Interest Rates on Late Payments and Prepaid or Overpaid Tax
From April 5th, 2025, HMRC have changed the basis on which they charge interest rates on late payments of tax. Previously, the rate used was the prevailing base rate +2.5%. It is now the base rate +4%, which (at the time of writing) is a rate of 8.5%.
It is worth noting that HMRC do have a credit interest rate on overpaid or prepaid tax. For example, for companies paying Corporation Tax within 9 months of the company year end, will get an interest credit.
The HMRC App and Income Tax Portal (the Personal Tax Account)
The HMRC App stores employment and pension information for any UK taxpayer. It enables users to view up to date employment data, PAYE Coding Notices and details of qualifying years for the State pension.
HMRC have launched an update Income Tax portal for 2025-26, which will enable taxpayers to register online and view that information and update HMRC with information, which may enable HMRC to amend a PAYE code.
https://www.gov.uk/guidance/download-the-hmrc-app
https://www.gov.uk/personal-tax-account
Key Tax Rates and Thresholds for 2024-25 and 2025-26
In these tables we are publishing some key tax rates for both 2024-25 and 2025-26. The 2024-25 rates will be relevant for the next Self-Assessment Tax Returns due for submission by 31 January 2026. The 2024-25 rates will be relevant for any income and expense you have from 6 April 2025.
Frozen until 2026
| 2024-25 | 2025-26 | Notes | |
| Upcoming Tax Return | Upcoming tax year | ||
| INCOME TAX & SAVINGS | |||
| Personal Allowance | £12,570 | £12,570 | Up to £100,000 |
| 20% Basic Rate Upper Limit | £50,270 | £50,270 | See ** below |
| Dividend Tax Rates | Rates applicable to both years | Unused Personal Allowance can increase the 0% band | |
| First £1,000: 0% Basic Rate: 8.75% | First £500: 0% Higher Rate: 33.75% Highest Rate: 39.35% | ||
| Personal Savings Allowance | Rates applicable to both years | ||
| (‘PSA’) | £1,000 of interest tax free for Basic rate taxpayers £500 for Higher Rate taxpayers | ||
| Nil Rate for Savings | £5,000 | £5,000 | |
| ISA Allowance (per person) Junior ISA | £20,000 £4,368 | £20,000 +£5,000 UK £9,000 | (Lifetime ISA is £4,000 in both years) |
| PROPERTY | |||
| Stamp Duty | Rates applicable to both years | ||
| 0-£125k – Nil | £925k – £1.5m – 10% | With +5% for second | |
| £125k – £250k: 2%* | Over £1.5m – 12% | homes / investment | |
| £250k – £925k – 5% | *0% band is £300k for first time buyers | properties | |
| Rent-a-Room | £7,500 | £7,500 | |
| COMPANIES AND EMPLOYERS | |||
| Employment Allowance on Employers NI | £5,000 | £10,000 | per Company |
| Standard PAYE code | 1257L | 1257L | |
| NI thresholds: Class 1 EmployeeClass 1 Employer | 12% then 10% after1/1/24 13.8% | 8% 15% | Threshold basis £1,048-£4,189 per month £758-£4,189 per month |
| National Living Wage | £11.44 per hour | £12.21 per hour | if 21 or over |
| Workplace pension threshold | £6,240 | £6,240 | |
| Corporation Tax Rate | 19% to 25% | 19% to 25% | |
| VAT | |||
| VAT Threshold for registration | Over £90,000 | Over £90,000 | De-registration: below £88,000 |
| Flat Rate Scheme (based on turnover) | Register if turnover is below £150,000 | Up to £230,000 turnover | |
| CAPITAL GAINS TAX | |||
| Annual Allowance | £3,000 £1,500 for Trusts | £3,000 £1,500 for Trusts | |
| CGT Rates | 20%/24%** higher rate 10%/18%** basic rate | 24%** higher rate 10%/18%** basic rate | ** +4% for Residential Property |
| INHERITANCE TAX | |||
| IHT Rate | 40% | 40% | |
| Nil Rate Band | £325,000 | £325,000 | |
| Residence Nil Rate Band | £175,000 | £175,000 | |
| PENSIONS | |||
| STATE PENSION | |||
| ‘Old’ Basic State Pension New State Pension | £169.50 per week £221.20 per week | £167.45 per week £230.25 per week | (maximum pensions based on years of contribution) |
| PERSONAL PENSIONS | Note that the maximum tax-free pension drawdown remains at £268,275. | ||
| Annual Allowance | £60,000 | £60,000 | |
| Lifetime Allowance | Not applicable | Not applicable | |
** Income Tax rates are slightly different in Scotland and Wales now.
