UK Tax Rates, Thresholds, and Allowances for 2024 Tax Year: What You Need to Know
As the 2024 tax year begins, it’s important to stay up-to-date on the latest UK tax rates, thresholds, and allowances. These figures determine how much tax you’ll pay on your income, savings, and investments. Understanding these rates and thresholds can help you plan your finances and minimise your tax bill.
For the 2024 tax year, the personal allowance is set at £13,000. This means that you can earn up to £13,000 before you start paying income tax. The basic rate of income tax is 20%, which applies to income between £13,001 and £50,270. The higher rate of income tax is 40%, which applies to income between £50,271 and £150,000. The additional rate of income tax is 45%, which applies to income over £150,000.
In addition to income tax, there are other taxes that you may need to pay, such as capital gains tax and inheritance tax. The thresholds and allowances for these taxes also change each year, so it’s important to stay informed. By understanding the latest tax rates, thresholds, and allowances, you can make informed financial decisions and ensure that you’re paying the correct amount of tax.
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Income Tax Overview
For taxpayers in the UK, it’s vital to know the income tax rates, thresholds, and allowances for the 2024 tax year. This section will give you a detailed overview of what you need to know to navigate the tax year effectively.
Income Tax Bands and Rates
The income tax rates for the 2024 tax year are as follows:
- Basic rate: 20%
- Higher rate: 40%
- Additional rate: 45%
The basic rate applies to taxable income up to £50,270. The higher rate applies to taxable income between £50,271 and £125,140, and the additional rate applies to taxable income over £125,140.
Personal Allowances
The personal allowance for the 2024 tax year is £12,570. This means that you won’t pay any income tax on the first £12,570 of your taxable income. However, your personal allowance may be reduced if your income is over £100,000.
Tax-Free Allowances and Deductions
In addition to the personal allowance, there are other tax-free allowances and deductions that you may be eligible for. For example, you may be able to claim tax relief on pension contributions, charitable donations, and work-related expenses.
It is important to note that the tax-free allowances and deductions vary depending on your circumstances. Therefore, it is recommended that you seek professional advice or consult the HM Revenue and Customs (HMRC) website to determine which allowances and deductions you are eligible for.
National Insurance Contributions
Working in the UK brings with it the obligation to pay National Insurance Contributions (NICs), which are crucial for securing your entitlement to certain state benefits. Understanding the NIC rates and thresholds for the 2024 tax year is imperative for both employees and employers.
NIC Rates and Thresholds
For the 2024 tax year, the primary threshold for Class 1 NICs is £10,500 per year. This means that you will not have to pay any NICs if you earn less than this amount. The lower earnings limit is £6,240 per year, which is the minimum amount you need to earn to receive credits towards your state benefits. The upper earnings limit is £51,000 per year. If you earn more than this amount, you will only pay NICs on the excess.
The secondary threshold, which is the amount at which employers start to pay NICs, is £10,500 per year. The upper secondary threshold is £51,000 per year. Employers pay 13.8% of their employees’ earnings above the secondary threshold.
For 2024 to 2025, the Class 2 NIC rate will be abolished. The Class 4 NIC rate will be 6% on profits between £12,570 and £50,270, and 2% on profits over £50,270. For directors, the Class 1 NIC rate will be 3.25% on earnings between the primary threshold and the upper earnings limit, and 2% on earnings above the upper earnings limit.
Class 1, 2, and 4 NICs
There are three types of NICs: Class 1, Class 2, and Class 4. Class 1 NICs are paid by employees and employers. Class 2 NICs are paid by self-employed people who have profits above the small profits threshold. Class 4 NICs are paid by self-employed people who have profits above the lower profits limit.
If you are employed, your employer will deduct Class 1 NICs from your salary. If you are self-employed, you will need to pay Class 2 and Class 4 NICs as part of your Self Assessment tax return. You may also be eligible for exemptions or reductions in your NICs if you are a low earner or have a disability.
Taxation of Savings and Investments
If you have savings or investments, you may be wondering how they will be taxed in the 2024 tax year. In this section, we’ll cover the key points you need to know.
Dividend Taxation
If you receive dividends from shares or funds, you will need to pay tax on them. The first £2,000 of dividend income is tax-free, but anything above this will be subject to tax. The dividend tax rates for the 2024 tax year are as follows:
- Basic rate taxpayers: 7.5%
- Higher rate taxpayers: 32.5%
- Additional rate taxpayers: 38.1%
Capital Gains Tax
If you sell assets such as shares or property for a profit, you may need to pay capital gains tax. The annual exempt amount for the 2024 tax year is £14,500. Any gains above this amount will be taxed at the following rates:
- Basic rate taxpayers: 10%
- Higher rate taxpayers: 20%
- Additional rate taxpayers: 20%
ISAs and Tax-Exempt Savings
ISAs (Individual Savings Accounts) are a tax-efficient way to save money. You can save up to £20,000 per year in an ISA, and any interest or gains you make are tax-free. There are several different types of ISA, including cash ISAs, stocks and shares ISAs, and innovative finance ISAs.
In addition to ISAs, you may also be able to take advantage of other tax-exempt savings options. For example, the starting rate for savings allows you to earn up to £5,000 of savings interest tax-free if you have no other income. There are also other tax-exempt savings options available, such as National Savings and Investments products.
Employment and Self-Employment
If you are employed, your employer will deduct Pay As You Earn (PAYE) tax from your wages. The amount of tax you pay depends on your taxable income. Your tax code determines how much tax you pay. You can check your tax code on your payslip or by contacting HM Revenue and Customs (HMRC). If your tax code is incorrect, you could be paying too much or too little tax.
If you’re navigating the realm of self-employment, understanding how to pay tax on your profits is crucial. This section elucidates the tax implications for both employed and self-employed individuals, ensuring you’re well-informed about deductions, allowances, and more.
PAYE and Tax Codes
Your tax code is based on your Personal Allowance, which is the amount of income you can earn before you start paying tax. For the 2024 tax year, the Personal Allowance is £12,570. If you earn more than this, you will pay tax on the amount above the Personal Allowance. The tax rates for the 2024 tax year are as follows:
- Basic rate: 20%
- Higher rate: 40%
- Additional rate: 45%
You may be entitled to other benefits and allowances, such as the Employment Allowance, which reduces the amount of National Insurance contributions (NICs) your employer has to pay. The Employment Allowance for the 2024 tax year is £4,000.
Benefits and Allowances
If you receive state benefits, such as Jobseeker’s Allowance or Universal Credit, these are usually taxable. However, some benefits are tax-free, such as Child Benefit and Disability Living Allowance. You can find more information about taxable and tax-free benefits on the GOV.UK website.
Self-Employment Taxation
If you are self-employed, you will need to pay tax on your profits. You can deduct allowable expenses from your income to work out your taxable profit. The tax rates for the 2024 tax year are as follows:
- Basic rate: 20%
- Higher rate: 40%
- Additional rate: 45%
You may also be entitled to the Trading Allowance, which allows you to earn up to £1,000 tax-free from self-employment. If you earn more than this, you will need to register for Self Assessment and complete a tax return.
It is important to keep accurate records of your income and expenses, as well as any tax you have paid. You can find more information about self-employment taxation on the GOV.UK website.
Pensions and Retirement
Concerned about how pensions are taxed in the UK? Our comprehensive guide on pensions and retirement taxation outlines everything you need to know for the 2024 tax year, from state pensions to private retirement planning.
State Pension Taxation
The UK State Pension is taxable, but it is paid gross. This means that no tax is deducted at source, and it is up to you to declare it on your tax return. The State Pension is treated as earned income, so it is subject to income tax. However, if your only income is from the State Pension, and it is below your personal allowance, you will not have to pay any tax.
Private Pensions and Allowances
If you have a private pension, the amount of tax you pay on it depends on how you take the money out. “If you take the whole amount as a lump sum, 25% of it will be tax-free, and the rest will be taxed as income. If you take it as a regular income, it will be taxed like any other earned income.
There are also pension allowances that you should be aware of. The annual allowance is the maximum amount you can contribute to your pension each year without incurring a tax charge. In the 2024 tax year, the annual allowance is £40,000. However, if you have a high income, your annual allowance may be reduced.
Additional Tax Considerations
In addition to income tax rates and allowances, there are other tax considerations that you should be aware of when planning your finances for the 2024 tax year in the UK. Below are some of the most important considerations.
Inheritance Tax and Allowances
Inheritance tax is a tax on the estate (the property, money and possessions) of someone who has died. In 2024, the inheritance tax allowance (also known as the nil-rate band) will remain at £325,000 per person. Any amount above this threshold is taxed at a rate of 40%. However, there are some exemptions and reliefs available that can reduce the amount of inheritance tax owed.
Tax Implications of Marriage and Civil Partnerships
If you are married or in a civil partnership, you may be eligible for certain tax benefits. The marriage allowance allows you to transfer £1,260 of your personal allowance to your spouse or civil partner if they earn less than you. This can reduce their tax bill by up to £252 per year. Additionally, if your spouse or civil partner has died, you may be eligible for bereavement support payments, which are tax-free.
Child Benefits and Tax Charges
If you have children, you may be eligible for child benefit payments. However, if you or your partner earns over £50,000 per year, you may have to pay the high income child benefit charge (HICBC). This means that some or all of the child benefit payments will be clawed back through the tax system. The HICBC is calculated based on your income, and can be up to 100% of the child benefit payments.
It is important to note that if you are married or in a civil partnership, the HICBC is based on your combined income. If you or your partner earns over £60,000 per year, you will have to pay back all of the child benefit payments.
Business and Corporation Tax
As a business owner in the United Kingdom, it is important to understand the tax rates, thresholds, and allowances for the 2024 tax year. This section will cover the key aspects of business and corporation tax, including corporation tax rates, small profits rate, and marginal relief.
Corporation Tax Rates
Corporation tax is a tax on the profits made by limited companies and other organisations, including clubs, societies, associations, and other unincorporated bodies. For the 2024 tax year, the main rate of corporation tax is 25% for non-ring fence profits above £250,000. This rate will remain in effect until further notice [1].
Small Profits Rate and Marginal Relief
If your company has profits below £250,000, you may be eligible for the small profits rate of 19%. However, if your profits are between £50,000 and £250,000, you may be eligible for marginal relief. This means that your company will pay a reduced rate of corporation tax on profits between the marginal relief lower limit and the marginal relief upper limit [2].
The marginal relief lower limit is calculated as follows:
Lower limit = £50,000 + (£250,000 - profits) / 100
The marginal relief upper limit is calculated as follows:
Upper limit = Lower limit + £50,000
For example, if your company’s profits for the 2024 tax year are £200,000, the marginal relief lower limit would be £225,000 and the marginal relief upper limit would be £275,000. Your company would pay a reduced rate of corporation tax on profits between £225,000 and £275,000, and the full rate of corporation tax on profits above £275,000.
Tax Administration
If you are a taxpayer in the UK, you will be required to file a self-assessment tax return and pay any tax due by the deadline. The deadline for filing your self-assessment tax return for the 2024 tax year is 31st January 2025. You can file your tax return online or by post. However, filing online is quicker and easier, and you can also pay your tax bill online.
Self-Assessment and Payment
To file your self-assessment tax return, you will need to provide details of your income, expenses, and any tax allowances you are entitled to. You can claim tax allowances for things like charitable donations, pension contributions, and work-related expenses. Make sure you keep accurate records of all your income and expenses throughout the year to make filing your tax return easier.
Once you have filed your tax return, you will receive a tax bill telling you how much tax you owe. You can pay your tax bill online, by phone, or by post. You should make sure you pay your tax bill by the deadline to avoid any penalties or interest charges.
Understanding Your Tax Bill
Your tax bill will show you how much tax you owe for the 2024 tax year. It will also show you any payments you have already made towards your tax bill, and any tax allowances you are entitled to. If you have overpaid your tax, you may be entitled to a refund. If you have underpaid your tax, you will need to pay the balance.
Future Tax Year Projections
It is important to keep up-to-date with changes to tax rates, thresholds, and allowances for future tax years. The Autumn Statement is usually published in November each year and provides an update on the government’s plans for tax and spending. You should also check the official government website for updates on tax rates and allowances for future tax years.