Blog

Tax Rates for 2024/25: A Comprehensive Guide

June 25, 2024

Introduction

Taxation is an unavoidable part of life, but understanding the specifics can help you manage your finances better. This guide provides an overview of the tax landscape for the 2024/25 tax year, including Income Tax thresholds, Personal Allowances, National Insurance, and more.

Personal Allowance

The Personal Allowance is the amount you can earn before paying Income Tax. For the 2024/25 tax year:

  • Under £100,000: £12,570
  • £100,000 to £125,140: Reduced by £1 for every £2 earned over £100,000
  • Over £125,140: £0

Additional allowances:

  • Blind Person’s Allowance: £3,070 extra
  • Married or in a Civil Partnership: May be eligible for the Marriage Allowance
  • Personal Savings Allowance: Tax-free interest on savings up to a certain amount
  • Property Allowance and Trading Allowance of £1,000 each can cover small amounts of income received

Income Tax Bands

Depending on your location within the UK, different rates apply.

For England, Wales, and Northern Ireland:

  • Up to £12,570: No Income Tax
  • £12,570 to £50,270: 20% Basic rate
  • £50,271 to £125,140: 40% Higher rate
  • Over £125,140: 45% Additional rate

For Scotland:

  • Up to £12,570: No income tax
  • £12,570 to £14,876: 19%
  • £14,877 to £26,561: 20%
  • £26,562 to £43,662: 21%
  • £43,663 to £75,000: 42%
  • £75,001 to £125,140: 45%
  • Over £125,140: 48%

National Insurance

National Insurance Contributions (NICs) also impact your take-home pay. Here are the rates for 2024/25:

For employees:

  • Up to £12,570 annually: No NICs
  • £12,570 to £50,270 annually: 8%
  • Over £50,270 annually: 2% on earnings above £50,270

For the self-employed:

  • Class 2 NICs:
    • If your profits are less than £6,725 a year, you do not have to pay anything but you can choose to pay voluntary Class 2 contributions
    • The Class 2 rate for tax year 2024 to 2025 is £3.45/week
  • Class 4 NICs:
    • Up to £12,570: No NICs
    • £12,570 to £50,270: 6%
    • Over £50,270: 2% on earnings above £50,270

Voluntary Class 3 NICs (for filling gaps in your NIC record):

  • £17.45 per week: £907.40 annually

Capital Gains Tax

Capital Gains Tax (CGT) applies when you sell or give away assets. For 2024/25:

  • Annual Exempt Amount: £3,000
  • Standard CGT Rate: 18% on residential property, 10% on other assets
  • Higher CGT Rate: 24% on residential property, 20% on other assets

Dividend Tax

For the 2024/25 tax year, the tax-free dividend allowance is reduced to £500. Dividends above this are taxed at:

  • Basic Rate: 8.75%
  • Higher Rate: 33.75%
  • Additional Rate: 39.35%

Inheritance Tax

Inheritance Tax (IHT) applies to the estate of someone who has passed away. The key thresholds are:

  • Up to £325,000: No IHT
  • Over £325,000: 40% on the excess (36% if at least 10% is left to charity)

Pension Contributions

Pensions Offer Tax Relief:

  • Basic Rate Taxpayers: 20% Tax relief
  • Higher Rate Taxpayers: Up to 40% Tax Relief (may need to claim through tax returns)
  • Top Rate Taxpayers: Up to 45% tax Relief

You can contribute up to £60,000 annually and still receive Tax Relief. The Pension Lifetime Allowance has been abolished as of April 6, 2024, but the tax-free lump sum is capped at £268,275.

Conclusion

Staying informed about tax rates and allowances can help you manage your finances more effectively. For the latest updates and detailed information, consult the HMRC website or seek advice from one of our tax professionals.

Gary Olding

Gary is the National Head of Tax and oversees our Tax Compliance and Medical Tax Teams. When not dealing with clients he is supervising operations, troubleshooting, and optimising workflows.

Terms and Conditions | Privacy Policy | Copyright Information | Official Information
© Copyright 2024 Hentons. All Rights Reserved.

Website design and build by Grey Matter | web design sheffield