13 changes to your money happening in April

The new tax year often brings a raft of changes that impact people’s pay, investments, savings and bills – and this year is no different. Here we list the big changes affecting people’s finances from next month.

1. National Insurance is cut again

Chancellor Jeremy Hunt announced the second cut to National Insurance for 2024 in his Spring Budget. It means the starter rate for National Insurance for employed people, which is charged on the band of earnings between £12,570 and £50,270, will be cut from the current 10% to 8%. But it has dropped from 12% at the end of last year. In good news for employees, the change should happen automatically, with payroll departments across the country implementing the reduction for staff.

Self-employed people got a similar two percentage point cut to their National Insurance rate, affecting around two million people. The rate for Class 4 National Insurance will be cut from 8% to 6% from April – having already been in line for a cut from 9%. At the same time the government previously announced it was abolishing Class 2 contributions, which comes into effect from April this year.

2. ISA changes are introduced

There are some big changes to ISAs coming in from April, and while savers and investors will see the benefit of them, some are quite technical and fiddly. Firstly, you will be able to pay into more than one of the same type of ISA each year, for investment and cash ISAs. It means that you can pay money into one cash ISA and then later in the tax year spy a better interest rate and open another cash ISA for more of your money. You can’t do this for Lifetime ISAs or Junior ISAs and you still need to make sure you don’t pay more than the £20,000 allowance into your ISA each tax year – across all your accounts.

Another change is that you may be able to transfer as much (or as little) as you want between different ISA providers. Right now, if you want to transfer cash and investments bought with money you paid in this year, you will have to move it all at once – but that may be a thing of the past from April. You will also not have to reapply for ISAs you already have open. Currently an ISA is classed as ‘dormant’ if no money has been paid in into it for a whole tax year, meaning you might be asked to reapply – but from April this red tape will be scrapped.

From April you will also be able to invest in long term asset funds (LTAFs) and open-ended property funds with redemption periods in the Innovative Finance ISA. The age for opening Cash ISAs is also changing, going up from 16 to 18 – bringing it in line with other types of ISA. But in practice, the rules mean the increase only affects anyone aged 15 and under at tax year end, with 16 and 17-year-olds (as at 5 April), still able to open and pay into a Cash ISA if they haven't already.

3. Capital gains tax breaks cut again…

From April, the tax-free allowance for capital gains tax (CGT) will be cut in half, from the current £6,000 down to just £3,000. It means the tax-free amount will be less than a quarter of what it was just over a year ago – and will lead to bigger tax bills for those sitting on gains.

It means someone with investment gains at the current limit of £6,000 will pay an extra £300 in tax in the 2024/25 tax year if they are a basic-rate taxpayer, or £600 if they are higher or additional rate taxpayers. The increase will be higher for those with gains on second properties, as they pay a higher rate of capital gains tax. Read more about how to beat the hike.

4. …but CGT rates cut for higher earners with second properties

From the new tax year the highest rate of capital gains tax will be cut. While the normal rates of capital gains tax are 10% and 20%, there is a higher rate for those who are selling a second property, of 18% for basic-rate taxpayers and 28% for higher-rate taxpayers. This means landlords who are selling up face a higher rate of tax on their gains, as well as having seen the tax-free amount slashed over the past few years.

But it was announced in the Spring Budget that the top rate of 28% will be cut to 24% from 6 April this year, to give a tax break for someone selling up. The lower rate of 18% remains unchanged. It means a higher-rate taxpayer with a £100,000 gain on their property will pay £3,880 less in tax next year than they otherwise would have, while someone with a £50,000 gain will pay £1,880 less in tax.

5. Dividend tax-free allowance also cut

The crackdown on dividend tax has already led to higher tax bills for investors and company directors, but the move to cut the tax-free dividend allowance in half from £1,000 to £500 from 6 April will cast the tax net even wider. The cut will mean that from April an additional rate taxpayer who has more than £1,000 of dividends will pay £197 a year more in tax than this tax year, while a basic-rate taxpayer will face an extra £44 on their annual tax bill.

This tax only applies to investments outside a pension or ISA, so moving your money into one of these tax-free accounts is your best way to reduce your tax bill. You can always transfer some assets to your spouse to make use of their tax-free and ISA allowances too. Read more about how to cut your dividend tax bill.

6. National minimum wage rises

The minimum wage will see a meaty increase in April – boosting the pay of the lowest earners in the UK. The minimum wage will rise by more than £1 an hour from April, to £11.44 an hour for those aged 21 and over. It’s a pay rise of £1,856 a year for someone working full time on the minimum wage and will take their annual salary to £20,820 a year*.

Younger earners will benefit even more, as those aged 21 and over will now be eligible for the full rate of minimum wage – where currently they get a reduced rate until they reach the age of 23. It means that a 21-year-old will see the minimum wage rise from £10.18 an hour now to £11.44 an hour from 6 April.

*Based on a 35-hour week.

7. State pension increases to £11,500 a year

Retirees will receive an inflation-busting 8.5% boost to their state pension from April that will see the ‘new’ state pension increase to £11,502.40 a year. The triple-lock promises to increase the state pension by the highest of average earnings growth, inflation or 2.5% each year – with earnings growth coming in at 8.5% and providing the measure for the uplift this year.

It means for those in receipt of the full new state pension, their weekly income will surge from £203.85 per week to £221.20 per week. Those on the ‘old’ state pension (paid to those who reached state pension age before 6 April 2016) will see their weekly income increase from £156.20 per week to £169.50 per week, amounting to £8,814 a year.

8. Child benefit extends to more families

The rules around child benefit will change from April, meaning a parent earning between £50,000 and £80,000 could be in for a windfall. The government has made two key changes: first, that the threshold where you start to lose child benefit payments is increasing from £50,000 to £60,000. That means if you earn between £50,000 and £60,000 you should be able to receive more child benefit.

The second change is that you’ll continue to receive some child benefit up to when you earn £80,000, where previously this cut-off was £60,000. A parent earning £60,000 currently isn’t eligible for any child benefit, but as a result of the changes they will now get the full amount from April, which equates to £2,212.60 a year from April for parents of two children.

The catch is that the benefit is based on both parents’ income – meaning if either of you earns more than the thresholds you’ll lose entitlement to the benefit. Families also need to claim the child benefit, they won’t automatically receive it.

9. Free childcare hours are extended – but be quick to claim

Another benefit for parents from this April is that the free childcare hours are being extended to two-year-olds. Currently most parents only get free hours once their child turns three, but that’s being extended so that parents will get 15 free hours of funding for two-year-olds from 1 April. But the deadline to claim the funding is 31 March – if you miss that you have to wait until September this year.

There is some small print to the free hours: they only apply to 38 weeks of the year, nurseries will often charge additional fees on top, and to be eligible, parents need to be working and both need to earn less than £100,000 a year.

10. Mobile, broadband and TV bills will rise

Lots of people will be surprised by how much their broadband, mobile phone and TV package bills increase by in April. These services typically have price increases baked into the contract that are pegged to the RPI measure of inflation. Because inflation has been high and the increases are RPI plus a bit more, it translates to some pricey increases in bills. While each contract might only equate to a few pounds here and there, if you add up all the changes across the year it can really rack up.

11. Council tax increases by almost 5% for most

The majority of councils are increasing their council tax by the maximum amount from April* – meaning people need to be braced for a price hike. The actual increase you’ll see depends on whether your local authority increases rates by the maximum 4.99% or a different sum, and also on what your council tax rate and band is. But a 4.99% increase for the average Band D property in the UK would mean it rising from £2,065 a year currently to £2,168 from April – a £103 increase.

*Based on survey by the County Councils Network

12. Energy bills drop by 12%

The energy price cap will reduce by 12% from April, making energy bills a bit cheaper for many households. It means the price cap for the average household will drop to £1,690 – a fall of almost £240 a year. While £20 a month isn’t a huge drop it will help to absorb some of the bill increases people are seeing elsewhere.

While the cut means that a typical bill will fall to the lowest level in two years, energy bills are still above where they were three years ago when the price cap stood at £1,138. One factor for those who are trying to cut costs is that standing charges have increased again, despite the fall in the price cap. That means that even before you’ve used a unit of electricity or gas you’ll have to pay £6.42 a week just to be connected – or £334 a year.

13. Pension lifetime allowance is abolished – for real

From April, we will be saying goodbye to the pension lifetime allowance, over one year after Chancellor Jeremy Hunt announced the plans at last year’s Spring Budget. For the past twelve months, pension providers, financial advisers and pension savers have been grappling with the details of the government’s new pension tax regime. But these rules are far from simple, and with the impending changes now just around the corner it’s important to understand what the new system will look like for pension savers come 6 April.

The lifetime allowance, currently set at an awkward £1,073,100, will be abolished completely next month. Instead, two new main allowances will be introduced for savers to contend with – the lump sum allowance and the lump sum and death benefit allowance – as well as a third relating to overseas transfers. The lump sum allowance, or the tax-free lump sum limit people can take from their pension, will be set at £268,275, and the lump sum and death benefit allowance will be set at £1,073,100.

These allowances are designed to limit the pension tax-free lump sums people can receive during their lives and the tax-free lump sums they can pass onto beneficiaries when they die. Where previously pension withdrawals exceeding the lifetime allowance could be subject to a lifetime allowance tax charge, savers can now take as much income as they want from their retirement pot, with just income tax to pay on pension withdrawals. On top of this, the new rules will also present some pension planning opportunities, though these would be best explored with help from a regulated financial adviser.