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2024/25 Tax Tables: A Guide to the New Tax Year

Get your head around the 2024/25 tax tables and prepare for the new financial year in style.

2024/25 Tax Rates: What has changed?

Let’s face it not many people LOVE tax! Whilst an important part of society, taxes require individuals and businesses to contribute a portion of income or profits to the government, creating a feeling of financial burden. However, tax allowances are used to create a more equitable tax system, supposedly helping to ensure the tax burden is distributed evenly across different income levels. This means it is an important part of planning someone’s finances. Here we explore the 2024/25 tax tables so you can prepare for the new financial year, which starts on April 6th, and leverage key tax allowance changes.

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Personal Tax Allowances and Income Tax

The personal allowance is set to remain the same as it was in the previous tax year. Similarly, the threshold for basic and higher rate tax bands will not change. However, the threshold for additional rate taxpayers will lower from £150,000 to £125,140. If you earn over the threshold for additional rates, this means you will start paying more tax sooner than before.

The 2024/25 income tax rates for Britain are:

  • Personal Allowance: 0% tax on earnings up to £12,570.
  • Basic Rate: 20% tax on earnings between £12,571 and £37,700.
  • Higher Rate: 40% tax on earnings between £37,701 and £125,140.
  • Additional Rate: 45% tax on earnings over £125,140.
  • Blind Person’s Allowance: £3,070 (increased from £2,870).
  • Rent a room relief (£7,500), trading income (£1,000) and property income (£1,000) all remain the same as last year.

A few key important things of note when planning your finances

  1. If you earn over £100,000, your personal allowance will be reduced by £1 for every £2 over the limit you earn. This means if you earn over £125,140, your personal allowance will be £0.
  2. Married couple’s and civil partners allowance reduced by £1 for £2 of adjusted net income over £37,000 until minim reached.
  3. £1,260 of the personal allowance can be transferred to a spouse or civil partner who is no more than a basic rate taxpayer, where both spouses were born after 5 April 1935.

The 2024/25 income tax rates for Scotland are:

Income tax rates for people living in Scotland have seen some changes.  From April 6th 2024 tax bands witness a rise in the starting point for income tax payments. Plus there will be an introduction of a new “advanced” rate tax band of 45% applied on income above £75,000 to £125,140.

  • Personal Allowance: 0% tax on earnings up to £12,570.
  • Starter Rate: 19% tax on earnings between £12,571 and £14,876.
  • Basic Rate: 20% tax on earnings between £14,877 and £26,561.
  • Intermediate Rate: 21% tax on earnings between £25,562 and £43,662.
  • Higher Rate: 42% tax on earnings between £43,663 and £75,000.
  • Advanced Rate: 45% tax on earnings between £75,001 and £125,140.
  • Top Rate: 48% tax on earnings above £125,140.

In Scotland the personal allowance is also reduced by £1 for every £2 earned over £100,000.

Dividend allowance for 2024/25

Dividends allowance at 0% for all individuals up to £500, this is a decrease from £1,00o from last tax year. Tax rates on dividend income:

  • Basic Rate: 8.75%
  • Higher Rate:33.75%
  • Additional Rate: £0

 

Get your head around the 2024/25 Personal Savings Allowances and ISA limits

The Personal Savings Allowance (PSA) allows individuals to earn interest on their savings without paying tax on it, up to certain limits. When it comes to tax on savings income there is a starting rate of 0% on income up to £5,000.  However, this is not available if taxable non-savings income exceeds the starting rate band. Then following that the allowances are as follows:

1. Basic Rate Taxpayers: eligible for a Personal Savings Allowance of up to £1,000 for the tax year 2024/2025. This means someone can earn up to £1,000 in interest on their savings without paying any tax on it.

2. Higher Rate Taxpayers: those in the higher rate tax band have a lower Personal Savings Allowance. For the new tax year the allowance is £500.

3. Additional Rate Taxpayers: Additional rate taxpayers do not have a Personal Savings Allowance. This means that all the interest they earn on their savings may be subject to tax.

It’s important to note that the Personal Savings Allowance applies to interest income from savings accounts, bank accounts, credit union accounts, and certain other types of interest-bearing accounts. It does not cover income from investments such as dividends or rental income.

Individual Savings Accounts Allowances (ISAs and JISAs)

TOP TIP: The Personal Savings Allowance is a reason why it is so important that people should make the most of tax-free investments such as an Individual Savings Accounts (ISAs), where interest earned on savings is held tax-free.

Individuals can save up to £20,000 a year in to an Individual Savings Account (ISA), there are Cash ISAs and Stocks and Shares ISAs for longer term saving. If you are saving for children you can contribute up to £9,000 in to a Junior ISA (JISA) or in to a child trust fund. You can also use a Venture Capital Trust (VCT) or Enterprise Investment Scheme (EIS) where you can get a 30% tax rebate for investing up to £2,000,000 for an EIS or £200,000 for a VCT. There is more about this later on in this guide.

Keep in mind that tax rules can change, and it’s always a good idea to check the latest information from HM Revenue & Customs (HMRC) or consult with a professional to ensure you have the most accurate and up-to-date details regarding the Personal Savings Allowance and other tax regulations.

Further Reading: How to pay less tax: utilise your tax allowances 

Pension tax relief: The Annual Allowance and Lifetime Allowance 2024/25

A pension annual allowance refers to the maximum amount of money you can contribute to your pension funds in a given tax year while still receiving tax relief. The annual allowance applies to defined contribution pension schemes, where contributions are made by individuals and/or their employers. It also applies to defined benefit pension schemes, where the pension amount is based on factors like salary and length of service. For the 2024/25 tax year the pension annual allowance remains unchanged at £60,000 and the charge on excess is at applicable tax rates on earnings. This allowance is reduced by £1 for every £2 of adjusted income, over £260,000, to a minimum of £10,000, subject to a threshold income over £200,000.

From 2023/24 and 2024/25 there is no lifetime allowance charge on high pensions savings. This could change in the future. The maximum tax-free pension lump sum is £268,275, unless a higher amount is “protected”.

State Pensions

The UK state pension is a regular payment provided by the government to individuals who have reached the eligible age, you can check your state pension age online. The full state pension amount is subject to change and is determined by the government. Individuals who have not contributed the required number of years may receive a reduced state pension. The new state pension system was introduced in April 2016, replacing the previous basic state pension. The new system is designed to be simpler and is based on an individual’s National Insurance record.

  • Basic state pension for a single person: £8,814 per year (£169.50/wk)
  • Basic state pension for a spouse or civil partner: £5,283
  • New state pension: £11, 502.40 per year (£221.20/wk)

It’s important to note that pension policies and regulations can change, and the information provided here is based on knowledge as of the date of this article.  For the most up-to-date and specific details about the UK state pension, including the current state pension age and benefit amounts, it is recommended to check with the official government sources.

Registered Pension

  • Lump sum and death benefit allowance: £1,073,100
  • Money purchase annual allowance: £10,00o

The money purchase allowance is a reduced annual allowance for contributions made to defined contribution pension schemes and was introduced to limit the amount of tax relief someone can receive when they have already begun drawing income from their pension.

This means that once an individual flexibly accesses their pension savings, their annual allowance for contributions to defined contribution pension schemes is reduced to £10,000 from the standard annual allowance of £60,000.

Speaking to a professional will ensure you understand rules in and around carry forward to make the most of tax free allowances.

Other high risk tax incentivised investments 2024/25

Another way of investing tax efficiently is via Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCTs). An EIS portfolio provides investors with direct ownership of shares in early-stage companies focused on achieving substantial growth over the medium to long term. In the 2024/25 tax year someone can invest up to £2,000,000 a year and receive 30% income tax relief on invested amounts. Additionally gains from successful companies are exempt from capital gains tax and loss relief is applicable for failures. The first million someone invests in to an EIS can be in to any type of EIS, however the 2nd million has to be in a knowledge-intensive company. As you can see there are a lot of complications and risk with this level of investment which is why it is best that this forms part of a wider financial plan.

VCTs are publicly listed companies on the London Stock Exchange that invest in the shares of a diverse array of small early-stage companies. Investors buy shares in the listed company (the VCT), gaining access to the extensive and diversified portfolio developed by the VCT over time. The VCT consistently makes new investments in start-ups, resulting in varying stages of growth for the portfolio’s companies. Like EIS an investor can claim 30% of the value of their investment off their income tax bill. The maximum you can invest in a single tax year in to a VCT is £200,000. Because there are a larger number of companies in a VCT portfolio, there is more balance between losses and gains so a VCT is often referred to as more stable than an EIS portfolio. However, it remains a very high-risk investment so it is crucial you get financial advice for this level of investment. For example, many people won’t know you need to keep your shares for at least three years and five years respectively.

Stamp Duty and Scotland Land and Buildings Transaction Tax

In regards to stamp duty, regulations vary based on your location within the UK, England and Northern Ireland, Scotland, or Wales, or if you are a non-UK resident. If you need assistance or guidance on stamp duty matters, feel free to reach out to us.

For the UK and Ireland, Stamp Duty Land Tax for main residences is as follows until March 31st, 2025

  • Property purchase price below £250,000: 0%
  • Property purchase price between £250,001 and £925,000: 5%
  • Property purchase price between £925,001 and £1,500,000: 10%
  • Property purchase price over £1,500,000: 12%
  • Enveloped* properties purchased for over £500,000: 15%
  • First time buyer property purchase price below £425,000: 0%
  • First time buyer property purchase price between £425,001 to £625,000: 5%

*This is for residential properties bought by companies

Stamp Duty for Commercial Property

  • Property purchase price below £150,000: 0%
  • Property purchase price between £150,001 and £250,000: 2%
  • Property purchase price over £250,000: 5%

After the UK’s departure from the EU, the Government introduced Freeports as a pivotal element in its economic strategy. The objective is to foster job creation, enhance international trade, contribute to regional development, and establish multiple centres for innovation. Areas granted Freeport status will enjoy advantages such as tax reliefs, for example there is a 0% stamp duty charge for commercial property in a freeport investment zone in England.

Scotland Land and Buildings Transaction Tax on Residential Property

  • Property purchase price below £145,000: 0%
  • Property purchase price between £145,001 and £250,000: 2%
  • Property purchase price between £250,001 and £325,000: 5%
  • Property purchase price between £325,001 and £750,000: 10%
  • Property purchase price over £750,000: 12%
  • First time buyers: 0% on the first £175,000

Scotland Land and Buildings Transaction Tax on Commercial Property

  • Property purchase price below £150,000: 0%
  • Property purchase price between £150,001 and £250,000: 1%
  • Property purchase price over £250,000: 5%

Wales Land Transaction Tax on Residential Property

  • Property purchase price below £225,000: 0%
  • Property purchase price between £225,001 and £400,000: 6%
  • Property purchase price between £400,001 and £750,000: 7.5%
  • Property purchase price between £750,001 and £1,500,000: 10%
  • Property purchase price over £1,500,000: 12%

Wales Land Transaction Tax on Commercial Property

  • Property purchase price below £225,000: 0%
  • Property purchase price between £225,001 and £250,000: 1%
  • Property purchase price between £250,001 and £100.000,000: 5%
  • Property purchase price over £100,000,000: 6%

Stamp Duty for additional properties, residential and all corporate residential properties

Property purchase £40,000 or more:

  • Stamp Duty Land Tax England and Northern Ireland: add 3% to rates
  • Scotland Land and Buildings Transaction Tax: add 6% to rates
  • Stamp Duty Land Tax England and Northern Ireland: add 3% to rates

Company & Business Owner Taxes

There are five key areas that UK business owners should be aware of when it comes to tax thresholds:

1. Corporation Tax : paid to the government by UK companies and foreign companies with UK offices. It is calculated based on profits in the following way:

Profits up to £50,000: 19%
Profits from £50,001 to £250,000: 26.5%
Profits over £250,001: £25%

2. Research & Development Tax Credits: The government will allow businesses to subtract money they invest in IT and plant machinery equipment from the profits they pay corporation tax on for the next three years.

3. Dividend Tax Rates and Thresholds: If you receive income from dividends, it is crucial to note that the tax-free dividend allowance is going to halve to £500 in the 2024/2025 tax year. Rates are as follows:

Dividends rates for basic rate taxpayers: 8.5%
Dividends rates for higher rate taxpayers: 33.75%
Dividends rates for additional rate taxpayers: 39.35%

4. Value Added Tax: VAT standard rate is 20%

5. 2023/24 Trustee’s Income: For trust income up to £500 dividends is 39.35% and other income is 45%

Planning for tax is a crucial aspect of managing a business and there are some key strategies that business owners can consider for effective tax planning. It isn’t just about understanding your tax obligations, taking advantage of reliefs or whether you are utilising your allowable business expenses. Have you considered also the tax implications of your structure and whether it aligns with your business goals? Have you efficiently structured your payroll and employee benefits? Are you unsure of what to do with spare cash, perhaps you have never explored tax-efficient investment options? Then there is the big question, what about the future of your business and what are the tax implications of your succession plan? There is so much opportunity for planning your finances tax efficiently that is probably untapped in your business.

Podcast: Tax Efficient Business planning

National Insurance Contributions 2024/25

Class 1 National Insurance Contributions (NIC) rates are:

  • Employees NIC: 10% (this was applied from 6th January 2024, a reduction from 13.8%)
  • Employers NIC: 13.8%
  • Employment allowance: £5,000 – per business, not available if sole employee is a director or employer’s NICs for 23/24 are £100,000 or more.
  • There is no NIC on first £242 per week (employee) and £175 per week (employer). Then the main rate is charged up to £967 per week for an employee and there is no limit for an employer. There is a 2% rate for employees on earnings above £967 per week.
  • There is nil rate of employer NIC on earnings up to £967pw for employees aged under 21, apprentices aged under 25 and ex-armed forces personnel in their first twelve months of civilian employment.

Class 2 (self-employed) NIC rates are:

Starting April 6, 2024, self-employed individuals earning over £6,725 are no longer obligated to make payments for Class 2 National Insurance Contributions (NICs). However, they will still be eligible for contributory benefits, including access to the State Pension.

Those with profits under £6,725 pay Class 2 NICs voluntarily to get access to contributory benefits including the state pension. The amount is £3.45 per week.

Class 3 NIC rate is a voluntary contribution at a flat rate of £17.45 per week.

Class 4 NIC is payable at 8% on self-employed profits from £12, 570 to £50, 270. Over this there is a 2% rate.

It’s important for individuals to regularly review their National Insurance records, understand their entitlement to the State Pension, and explore options to fill any gaps in contributions. Seeking advice from pension advisors or the government’s Pension Service can provide personalized guidance based on individual circumstances. Additionally, pension rules and regulations can change, so staying informed about updates is crucial for effective retirement planning.

Utilising family tax allowances to become more tax efficient in 2024/25

Family allowances contribute to tax efficiency by providing families with opportunities to reduce their overall tax liability. This can include deductions for dependent children, education-related expenses, and other family-specific tax benefits. The marriage allowance, for example, is a transferable allowance that enables married couples to transfer part of their personal allowance to one another, as long as the recipient is not liable to pay higher or additional tax rates.

Marriage allowance will remain the same as the 2023/24 tax year. However, married couple’s and civil partner’s allowance at 10% will rise to £11,080. The allowance is reduced by £1 for every £2 of adjusted net income over £37,000, this is an increase from last year of £34,600, until the minimum is reached.

The marriage/civil partner’s transferrable allowance is £1,260 and the married couple’s/civil partner’s allowance minimum is £4,280 (was £4,010 in 2023/24), whilst the maximum is £11,080 (increased from £10,375 in 2023/24).

High income child benefit charge

The High Income Child Benefit Charge (HICBC) is a tax charge introduced  to gradually reduce the amount of child benefit received by higher-income individuals or households. Child benefit is a government payment provided to eligible parents or guardians to support the cost of raising children.

If an individual or their partner earns over a certain threshold (currently £50,000), the HICBC will apply. For every £100 of income above the threshold, 1% of the child benefit received is withdrawn. Once income reaches £60,000 or higher, the HICBC completely cancels out the child benefit received.

It is important to note that the HICBC is based on an individual’s income and not household income. Hence, even if only one individual in the household earns above the threshold, the HICBC may apply.

Inheritance & Capital Gains Tax Rates in 2024/25

We understand there is a reluctance and discomfort associated with planning for death and this can be attributed to various psychological, cultural, and societal factors.  Death is one of life’s greatest uncertainties, evoking fear and discomfort and different cultures have varying beliefs surrounding this part of life. End of life matters are emotionally distressing and the human natural tendency to avoid unpleasant thoughts makes financially planning for this something many people put off. Despite these challenges, there are benefits of engaging in end-of-life planning because it allows individuals to make decisions aligned with their preferences, provide for loved ones, and alleviate the burden on family members during difficult times. A key part of this is understanding the tax implications a death has on people inheriting wealth. Here is a summary of the 2024/25 inheritance tax rates:

  • Inheritance Tax Rate for estates: 40%, or 36% if 10% or more of an estate is left to charity.
  • Rate for lifetime transfers to and from certain trusts: 20%
  • Nil-rate band limit: £325,000
  • Residence nil-rate band limit: £175,000
  • Overseas domiciled spouse/civil partner exemption: £325,000
  • Annual exempt gifts: £3,000 per donor, £250 per donee

 

Key tips when it comes to tax efficient inheritance planning

  • Up to 100% of the unused proportion of a deceased spouse’s/civil partner’s nil-rate band and/or residence nil-rate band can be claimed on the survivor’s death.
  • For estates over £2,000,000 the value of the residence nil-rate band is reduced by 50% of the excess over £2,000,000.
  • There is 100% relief for businesses, unlisted/AIM companies and some farmland/buildings. There is also a 50% relief of certain other business assets.
  • There is a tapered tax charge on lifetime gifts between 3 and 7 years of death. Years 0 to 3 full 40% rate, then 8% less for each year until 0% at 7 or more years.

 

Capital Gains Tax for 2024/25

Capital gains tax (CGT) is levied on the profit earned from the sale of an asset that has increased in value over time. This tax is applied to the difference between the sale price of the asset and its original purchase price, this is known as the capital gain. Tax can arise from the sale of various assets, such as stocks, real estate, and other investments.

  • Capital Gains Tax annual exempt amount for individuals: £3,000 (a reduction from £6,000 in 2023/24)
  • Capital Gains Tax annual exempt amount for most trustees: (1,500 (a reduction £3,000 in 2023/24)
  • Basic rate taxpayer: 10%
  • Higher & additional rate taxpayer: 20%
  • Trusts and estates: 20% (unchanged from previous year)
  • Surcharge for residential property and carried interest: Remains at 8%
  • Gains subject to business asset disposal relief (BADR):  10%
  • Lifetime limit on qualifying gains: £10,000,000

While Capital Gains Tax is primarily concerned with the transfer of assets, it’s important to coordinate inheritance planning with Inheritance Tax considerations. Inheritance planning involves complex tax considerations, and seeking advice from tax professionals, financial planners, or solicitors is crucial. They can help navigate the complexities of Capital Gains Tax, Inheritance Tax, and other relevant tax implications.

 

Extra reading: Guide to Inheritance

Get ahead in life by making the most of tax efficient financial planning

Whether you manage your own finances or you have an adviser to manage your finances, tax-efficient planning is a crucial component of an overall financial plan. It strategically manages your financial affairs to minimise the impact of taxes. Here’s how tax planning fits into the broader framework of your financial strategy:

1. Maximising income and minimising deductions: If you or your financial adviser can identify opportunities to increase tax-efficient income, like using reliefs and tax thresholds you can reduce the impact tax has on your finances.

2. Investment Planning: Choosing tax-efficient investment strategies minimise capital gains and income taxes.

3. Estate Planning: Structuring your estate in a tax-efficient manner can minimise inheritance taxes and the right financial products can ensure you transfer wealth down to other generations tax efficiently.

4. Retirement Planning: Contributing to tax-advantaged retirement accounts to reduce current taxable income. Strategically withdrawing funds during retirement to manage tax liability.

5. Business and Employment Decisions: Structuring business activities to take advantage of tax reliefs and making the most of tax thresholds, along with considering the tax implications of employment decisions, such as stock options or benefits.

6. Education Planning: Utilising family related tax credits and tax efficient savings accounts when it comes to saving for children and for their education.

7. Charitable Giving: Using tax reliefs available to you for charitable contributions.

By integrating tax planning into your overall financial plan, you can potentially reduce your tax liability, increase your income after tax and make the most of your financial resources. If you want to work with a financial adviser who can provide valuable insights and help tailor strategies to your specific financial situation and goals you can find out more about our work by reading some client financial advice case studies or fill in one of our contact forms below.

 

Author & Editor: Cherie-Anne Baxter, Marketing Director

Date Written: 21st February 2024

Date Updated: 21st February 2024

 

Risk Warnings:

For ISA’s Investors do not pay any personal tax on income or gains but ISAs do pay unrecoverable tax on income from stocks and shares received by the ISA manager . Tax treatment varies according to individual circumstances and is subject to change.

Enterprise Investment Schemes (EIS) & Venture Capital Trusts (VCT) invest in assets that are high risk and can be difficult to sell.

The value of the investment and the income from it can fall as well as rise and investors may not get back what they originally invested, even taking into account the tax benefits.

Tax treatment varies according to individual circumstances and is subject to change.

Succession Planning, Inheritance Tax Planning & Estate Planning are not regulated by the Financial Conduct Authority

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