Tax Bands and Rates for 2024/25

This blog aims to break down the current tax bands and rates, personal allowances, and additional allowances that could affect your tax liabilities for the tax year running from 6 April 2024 to 5 April 2025.

Your Tax-Free Personal Allowance

The standard Personal Allowance for the 2024/25 tax is £12,570. This is the amount of income on which you do not have to pay tax.

Your Personal Allowance may increase if you qualify for the Marriage Allowance or Blind Person’s Allowance. However, it diminishes for high earners. If your income exceeds £100,000, the allowance reduces by £1 for every £2 of income above this threshold, disappearing entirely at an income level of £125,140.

Income Tax Bands and Rates

With the UK’s tax system, the more you earn, the higher the rate of tax you pay on the additional income. Here are the details for each band:

  • Personal Allowance: Up to £12,570 at 0% tax.
  • Basic Rate: £12,571 to £50,270 at 20% tax.
  • Higher Rate: £50,271 to £125,140 at 40% tax.
  • Additional Rate: Over £125,140 at 45% tax.

You do not receive a Personal Allowance if your taxable income exceeds £125,140.

Other Allowances and Reliefs

In addition to the standard tax allowances, there are specific allowances for savings interest and dividend income if you own shares in a company. The first £1,000 of income from self-employment or property rental (unless using the Rent a Room Scheme) is also tax-free.

These are known as your ‘Trading Allowance’ and ‘Property Allowance’ respectively.

National Insurance Contributions

National Insurance Contributions (NICs) are another component of your payroll deductions. For the 2024/25 tax year, employees pay:

  • 12% on earnings between £9568 and £50,270.
  • 2% on earnings over £50,270.

Employers contribute an additional 13.8% on earnings above £9,568 on behalf of their employees.

Special Considerations

  • Marriage Allowance: If your income is less than the standard Personal Allowance, you might reduce your partner’s tax by transferring £1,260 of your Personal Allowance to them.
  • High Income: If your adjusted net income exceeds £100,000, your Personal Allowance reduces, increasing your tax liability proportionally.
  • Self-Assessment: High earners with adjusted net incomes over £150,000 must complete a Self-Assessment tax return. If this is your first time, remember to register by 5th October following the tax year.

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