Understanding the 2024/25 UK Tax Changes: What Businesses Need to Know

Corporation Tax: The Marginal Relief Zone

If your company profits fall between £50,000 and £250,000, you sit in the marginal relief zone — meaning you pay an effective rate somewhere between 19% and 25%. This is one of the most misunderstood areas of UK tax, and getting it wrong can be costly.

For Essex businesses with profits in this band, careful planning around timing of expenditure, pension contributions, and director salary levels can make a significant difference. Our accounting and tax team specialises in marginal relief planning for limited companies across Benfleet, Basildon, and Southend.

National Insurance Changes

The employee NI rate was cut from 12% to 10% in January 2024, and then further to 8% from April 2024. For a typical employee earning £35,000, this represents a saving of around £900 per year.

However, employer NI rates remain unchanged at 13.8% above the secondary threshold. If you run a payroll, it's worth reviewing your employment allowance claim — eligible businesses can offset up to £5,000 of employer NI per year. Our payroll services team handles all RTI submissions and ensures you're claiming every allowance available.

Dividend Allowance Slashed to £500

This is the change that will hit owner-managed limited companies hardest. The dividend allowance has been cut from £1,000 to just £500 from April 2024. Combined with the previous cut from £2,000 to £1,000, the allowance has dropped by 75% in two years.

For a director taking £30,000 in dividends, this means an additional £500 of dividends now fall into the basic rate band (taxed at 8.75%) or higher rate band (33.75%). The impact depends on your total income, but it's another reason to review your salary/dividend mix with a qualified accountant.

Capital Gains Tax: Annual Exempt Amount Reduced

The CGT annual exempt amount has been cut from £12,300 to just £3,000 for 2024/25. This affects anyone selling assets — property, shares, business assets — and means more gains will be subject to tax.

For business owners considering selling their company or assets, Business Asset Disposal Relief (formerly Entrepreneurs' Relief) remains available at 10% on qualifying gains up to £1 million lifetime. Careful planning around the timing of disposals is essential.

What Should Essex Businesses Do Now?

The combination of these changes means that proactive tax planning has never been more important. Here's what we recommend:

1. 01
   Review your company structure

   Is a limited company still the most tax-efficient structure for your business? With the dividend allowance cut, some sole traders may now be better off.

2. 02
   Maximise pension contributions

   Employer pension contributions reduce your Corporation Tax bill and are not subject to NI. This is one of the most tax-efficient ways to extract profit.

3. 03
   Plan your salary/dividend mix

   The optimal split has changed. Most directors should take a salary up to the NI secondary threshold (£9,100) and top up with dividends.

4. 04
   Review your bookkeeping

   Accurate, up-to-date records are essential for tax planning. Our bookkeeping services ensure your numbers are always current.