Essential Tax Tips for Small Business Owners in 2024/25 Year

Essential Tax Tips for Small Business Owners in 2024/25 Year

The changes implemented by the Chancellor in the Spring 2024 Budget will have a significant impact on small businesses, highlighting the need for a timely review of your tax to ensure you are prepared for the 2024-2025 financial year.

Reduction in National Insurance Contributions:

From 6 April 2024, National Insurance Contributions (NICs) for employees and the self-employed will be reduced by 2 pence. NICs for employees have fallen to 8%, while NICs for the self-employed have been reduced to 6% following a previous reduction in the Autumn 2023 Budget, reducing National Insurance by a third. In addition, from April 2024 the self-employed will no longer have to pay Class 2 NIC charges, simplifying the NIC structure for this group.

Reduction in dividend allowance:

The tax-free dividend allowance was already reduced from £2,000 to £1,000 in April 2023 and is now halved from £1,000 to £500 from 6 April 2024. In response to these adjustments, limited company owners may need to rethink their compensation strategies.

Increasing the VAT registration threshold:

From 1 April 2024, the VAT registration threshold will increase to £90,000 with a corresponding increase in the de-registration threshold to £88,000. As noted in the Budget, this change is expected to relieve around 28,000 businesses of their VAT liability, however VAT registration will still require careful consideration and an expert assessment of a range of operational and financial factors.

Increasing the child benefit threshold:

The child benefit threshold has been increased to £60,000 and the graduation band upper limit has been raised to £80,000, providing relief for many working and self-employed parents.

Increase in the minimum wage:

From 6 April 2024, the new wages will be £6.40 per hour for workers and apprentices under 18, £8.60 per hour for workers aged 18-20 and £11.44 per hour for employees aged 21 and over. In addition, the minimum age for the National Living Wage has been reduced from 23 to 21. Employers should carefully review their payroll systems to ensure they comply with these updated pay rates and age limits. These changes highlight the importance of staying informed and proactive when managing payroll obligations.

Research and Development Tax Relief Reform:

From April 2024, the corporation tax relief regime for research and development (R&D) will be simplified to a single R&D allowance. These changes will primarily benefit larger businesses, but are also important for eligible SMEs, who will need to fully understand the revised rules and reporting requirements.

Capital Gains Tax Adjustments:

From 6 April 2024, the higher capital gains tax rate on residential property transactions will be reduced to 24%. In addition, the annual capital gains tax allowance for individuals will be permanently set at £3,000, adjusted downwards from the previous amount.

Business Tax Changes:

The government has announced that it will freeze the SME multiplier at 49.9 pence and extend the RHL (Retail, Hospitality and Leisure) Business Tax Relief regime, providing relief of up to 75%. 110,000 yen per company. These adjustments highlight the importance for eligible businesses to carry out a comprehensive Business Tax Impact Assessment to ensure compliance and make the most of the relief options available to them.

Introduction of income-expense accounting:

From 6 April 2024, income-expense accounting will become the standard method for calculating profits for eligible sole traders and partners with trading income. These changes, accompanied by the removal of the £500 per annum cap on interest deductions and the relaxation of the size threshold for using income-expense accounting, highlight the need to carefully evaluate accounting methods.

Further measures for the tax year:

A range of further measures for the tax year, including provisions for the UK Independent Film Tax Credit, the Empty Property Relief Tax and other initiatives, reflect the evolving tax landscape. Taxpayers should develop a comprehensive understanding and engage in strategic planning to get through this tax year.


These significant changes require careful consideration and proactive action by small business owners and self-employed individuals. It is important to engage an expert to fully understand the impact of these changes, ensure compliance, and develop a customized strategy to take advantage of the opportunities of the evolving tax environment.

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