Income Tax Threshold – Budget 2024

Post-October 2024 Budget: Income Tax Threshold – What Does It Mean for You?

Following the recent budget, changes to the income tax threshold may affect your earnings. This article highlights key adjustments in income tax rates and thresholds and provides tax-saving tips to help you navigate these updates effectively.

Income tax thresholds remain frozen until April 2028

The tax thresholds have been frozen since April 2021 meaning more people are finding their income falls into a higher band. Being aware of your total taxable income each tax year means you can take planning steps to reduce your tax liability.

For the thresholds, it is ‘Adjusted Net Income’ that is the amount that is considered. This is all your income, including interest, net rental income (after expenses), dividends, pension income (including state pension) LESS personal pension contributions and GiftAid donations.

If your adjusted net income exceeds £100,000, you start to lose your tax- free personal allowance. The effective tax rate on income that falls within the band of £100k – £125k can be up to 60%.

If you or your partner are in receipt of child benefit clawback of this commences once either partner’s income exceeds £60k. If it exceeds £80k then the whole of the benefit is repayable. The charge applies to the partner with the highest adjusted net income over £60k. ‘Partner’ means someone who you’re married to, in a civil partnership with or living with as if you were.

 

Tax tip

  • Consider making a personal pension contribution or GiftAid payment to reduce taxable income below £100k and preserve your personal allowance (worth up to £5,028), or below £60k to preserve child benefit. Be mindful of the timing of pension contributions and donations, to ensure you utilise them in the most tax efficient year.
  • Closely monitor dividends taken from your company each tax year. It may be possible to take a short-term loan form the company instead of a dividend; please discuss with your accountant before doing this

 

Unlock the Full Potential of the Budget with Competex:

The budget has introduced some significant changes. At Competex, we break down the key changes and provide advice on how to use them to your advantage. Whether it’s for your personal taxes or business planning, we’re here to help you navigate the complexities.

For further information, please contact us at info@competex.co.uk or visit our website at https://www.competex.co.uk.

 

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Author: Kavit Sethi
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