The imminent new tax year brings with it a range of new pension, investment and tax changes. Kate Smith, head of Pensions at Aegon, highlights seven that may affect clients from 6 April 2024.
1. The State Pension
The State Pension increases by 8.5% – the second highest increase to State Pensions after last year’s record-breaking 10.1% uplift. Those pensioners receiving the full new State Pension will see their pension rise to £11,502 a year, while those receiving the full old State Pension will get £8,814 a year.
2. National Insurance contributions
There’s a drop in National Insurance contribution rates for both employees and the self-employed. Employees NI rates fall from 10% to 8%, while the self-employed NI rates drop from 9% to 6%, putting more money in some people’s pockets.
3. Pension allowances
The pension Lifetime Allowance (LTA) of £1,073,100 will be abolished on 5 April 2024. It’s replaced by two new allowances, a Lump Sum Allowance and a Lump Sum and Death Benefit Allowance on 6 April 2024. The Lump Sum Allowance limits the pension tax-free lump sums payable to the member in their lifetime to £268,275. Some with previous LTA protections could still qualify for more.
The Lump Sum and Death Benefit Allowance limits the amount of tax-free lump sums that can be paid in both lifetime and on death to £1,073,100 but may be higher for those with LTA protections.
Individuals will be able to save more, tax-efficiently in a pension over their lifetime, but new Lump Sum and Death Benefit Allowances may bite for some.
4. Multiple ISAs in each tax year
Individuals will be able to invest in more than one ISA, including of the same type, in each tax year, subject to the overall £20,000 ISA limit. This gives more flexibility in how people save and invest in ISAs.
5. Capital Gains Tax
The tax-free allowance for Capital Gains Tax (CGT) is being cut from £6,000 to £3,000. This is the second cut to CGT in a row following the reduction in April 2023 from £12,300 to £6,000.
6. Dividends allowance
The tax-free allowance for dividends is being cut from £1,000 to £500. This is the second cut in a row following the reduction in April 2023 from £2,000 to £1,000.
7. Child Benefit tax threshold
There’s a rise in the High-Income Child Benefit threshold from £50,000 to £60,000 a year. This coupled with an extension of the tapered tax charge, now applying between £60,000 and £80,000 of income, means more families will benefit from child benefit.
