How to prepare for the new tax year 2024/25 - from tax codes to child benefit

The beginning of a new tax year is often a time of major shake-ups. The start to the 2024/25 year has been no different.

As well as tax changes, investors have been hit by a cut to the CGT tax-free allowance, as well as double taxation on second homes and the axing of stamp duty relief for multiple property ownership.

It comes hot on the heels of several other major changes, such as inflation-busting hikes to household bills, the energy price cap dropping by 12.3% and a rise in the state pension.  

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With the new tax year now upon us, we’ve highlighted everything you need to know about filing self-assessment tax returns for the new tax year - while being in the good books of the taxman.

New tax year 2024/25 checklist

Here are some pointers to keep in mind when approaching the new tax year:

1. Tax filing for beginners

For those who are filing their tax returns for the first time, they will have to register with HMRC. After registering, you will receive a Unique Taxpayer Reference which will then be used for all future tax returns.

2. Know your tax code

It’s important to know your tax code to work out how much income tax will be taken by the HMRC. These are the numbers and letters on your payslip or pension statement.

They can be a hassle to fix if you get the wrong one, as you could either be owed in large amounts or be left with a hefty bill to pay back. The personal allowance and emergency tax code remain the same for the new tax year - at £12,570 and 1257L respectively. So luckily, you won’t have to update any employee tax codes unless you have been specifically told to by HMRC.

3. Check your tax allowances

Many will have taken advantage of capital tax gains allowance and ISA limits before 5 April 2024 - when the 2023/24 tax year came to an end. But what are the allowances for 2024/25?

With capital gains tax allowance, you can now get £3,000 on your returns (down from £6,000 last year). Luckily, ISAs have been refreshed, so it’s worth considering using them to shield your cash from the taxman. Keep in mind that you have an ISA allowance of £20,000 which applies to cash ISAs, stocks and shares ISAs, lifetime ISAs and innovative finance ISAs.

A 2p National Insurance cut announced during the Spring Budget means that the average worker on £35,400 a year will now be better off by more than £900 (when the January 2p cut is also taken into account). However, you may still be paying more tax overall due to fiscal drag.

You may also consider paying into your children's or spouse’s pension, which would be separate from your annual pension allowance of £60,000.

4. Self-assessment tax returns

Self-assessment tax returns are not just for those who are self-employed. Anybody who rents out property, or gets additional income from savings or investments, is also required to pay tax.

And with more people being brought into higher tax bands due to fiscal drag, it’s worth having a look to avoid being penalised in the future. If you’re unsure about whether you’re eligible, you can check on the UK Government website.

5. Tax relief for couples

For some married couples, tax bill reliefs are available under the Marriage Allowance, where one partner can transfer some of their personal tax allowance to the other to reduce the total tax paid by the couple.

You can transfer £1,260 of your personal allowance to your husband, wife or civil partner, which in turn will reduce their tax by up to £252 in the tax year. But only those who earn between £12,570 and £50,270 can claim this benefit.

6. Claim child benefit

Changes to child benefit made in the Spring Budget last month mean that you may be eligible for child benefit now if you weren’t before.

Under the new guidelines, the income threshold for parents would be raised from £50,000 to £60,000, which means that anyone who earns under this limit will be able to keep all of their child benefit. According to the government’s estimates, this would boost nearly half a million families with a surplus of £1,260 on average.

7. Avoiding scams

Self-assessment tax scams are rife, especially with the onset of a new tax year. Last year, HMRC received over 130,000 reports about tax scams, and almost half of them were offering fake tax rebates.

This means that you should take extra steps to avoid getting caught in one of these scams, especially with the rise of AI and the promise of saving money.

If you do get targeted by a self-assessment scam, you can forward it to HMRC on 60599 or phishing@hmrc.gov.uk. To report any tax scam phone calls to HMRC, you can do it using the GOV.UK website.

It’s also worth reporting this to Action Fraud and contacting your bank immediately if you have fallen for a tax scam. They may be able to help freeze any payments being made from your account to scammers.