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Tax Rates and Allowances 2024: What You Need to Know
If you’re a UK taxpayer, it’s important to stay up-to-date with the latest tax rates and allowances. The tax year 2023 to 2024 has ended, and the new tax year 2024 has begun. This means that there have been changes to the tax rates and allowances that you need to be aware of.
The tax-free personal allowance has increased to £12,570 for the tax year 2024. This means that you won’t have to pay any income tax on the first £12,570 of your earnings. The basic rate of income tax remains at 20%, and this applies to earnings between £12,571 and £50,270. If you earn more than this, you’ll be taxed at a higher rate. National Insurance rates have also changed, so it’s important to check how much you’ll be paying.
Overview of Tax Rates and Bands
When it comes to tax rates and allowances in 2024, there are several important factors to consider. The following subsections will provide an overview of the key details you need to know.
Income Tax Rates and Bands
The income tax rates and bands for the 2024 tax year are as follows:
| Taxable Income | Income Tax Rate |
|---|---|
| Up to £12,570 | 0% |
| £12,571 to £50,270 | 20% |
| £50,271 to £150,000 | 40% |
| Over £150,000 | 45% |
These rates apply to your taxable income, which means any income you receive after your personal allowance has been deducted.
National Insurance Contributions
National Insurance contributions are pivotal in your tax considerations. For detailed insights on your obligations, especially if you’re self-employed, this comprehensive guide on Self-employed National Insurance can be invaluable.
The rates for the 2024 tax year are as follows:
| Earnings | Class 1 National Insurance Rate |
|---|---|
| Up to £9,568 | 0% |
| £9,569 to £50,270 | 12% |
| Over £50,270 | 2% |
Class 2 National Insurance contributions are payable by self-employed individuals with profits of £6,515 or more per year, while Class 4 National Insurance contributions are payable on profits of £9,568 or more per year at a rate of 9%.
Dividend Taxation
If you receive dividend income, you’ll also need to be aware of the dividend tax rates and allowances for the 2024 tax year. The rates are as follows:
| Dividend Income | Dividend Tax Rate |
|---|---|
| Up to £2,000 | 0% |
| £2,001 to £50,000 | 7.5% |
| Over £50,000 | 32.5% |
Capital Gains Tax
Capital gains tax is payable on any profits you make when you sell assets such as property or shares. The rates for the 2024 tax year are as follows:
| Taxable Gains | Capital Gains Tax Rate |
|---|---|
| Up to £12,300 | 0% |
| £12,301 to £50,270 | 20% |
| Over £50,270 | 40% |
Corporation Tax
If you run a business, you’ll need to be aware of the corporation tax rates and allowances for the 2024 tax year. The main rate of corporation tax is 19%, while the small profits rate is 21%.
Tax Allowances and Reliefs
As a taxpayer, it is important to understand the various tax allowances and reliefs available to you. These can help to reduce your tax bill and increase your take-home pay. In this section, we will discuss the different types of tax allowances and reliefs that are available for the tax year 2024.
Personal Allowances
The personal allowance is the amount of income you can earn before you start paying income tax. For the tax year 2024, the personal allowance is £12,570, which is the same as in the previous tax year. However, if you earn over £100,000, your personal allowance will be reduced by £1 for every £2 you earn over this threshold until it reaches zero.
Savings Allowances
If you have savings, you may be eligible for a tax-free savings allowance. For the tax year 2024, the personal savings allowance is £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. If you are a basic rate taxpayer, you can earn up to £1,000 in savings interest tax-free. If you are a higher rate taxpayer, you can earn up to £500 in savings interest tax-free.
In addition to the personal savings allowance, there is also a starting rate for savings. This is available for those with low incomes and allows you to earn up to £5,000 in savings interest tax-free.
Marriage and Civil Partnerships
If you are married or in a civil partnership, you may be eligible for a tax break. The marriage allowance allows you to transfer up to 10% of your personal allowance to your spouse or civil partner, which can help to reduce their tax bill. To be eligible for the marriage allowance, you must earn less than your partner and have an income of £12,570 or less.
In addition to the marriage allowance, there is also the married couple’s allowance. This is available to those who are married or in a civil partnership and at least one partner was born before 6 April 1935. The allowance is worth between £9,125 and £10,925 and can help to reduce your tax bill.
Miscellaneous Allowances
There are also a number of other tax allowances and reliefs available, including the blind person’s allowance, which is worth £3,070 for the tax year 2024. This is available to those who are registered blind or severely sight impaired.
If you have self-employed income, you may be eligible for the trading allowance or the property allowance. The trading allowance allows you to earn up to £1,000 tax-free from self-employment, while the property allowance allows you to earn up to £1,000 tax-free from rental income.
Finally, there is the rent-a-room relief, which is available to those who rent out a room in their home. The relief allows you to earn up to £7,500 tax-free from renting out a room.
Pensions and Retirement
Regarding retirement savings, many opt for private pensions. Understanding how to make pension contributions through a limited company can offer tax-efficient ways to plan for retirement.
State Pension Contributions
The state pension is a regular payment from the government that you can receive when you reach state pension age. The amount you receive depends on your National Insurance contributions. You can check your National Insurance record and get an estimate of your state pension on the government’s website.
Private Pensions
Private pensions are another option for saving for retirement. These are pensions that you arrange yourself, rather than through your employer. There are two main types of private pension: defined benefit and defined contribution.
With defined benefit pensions, your employer guarantees you a certain level of income when you retire, based on your salary and years of service. With defined contribution pensions, you build up a pot of money over time, which you can then use to buy an annuity or draw down income in retirement.
Pension Taxation
When it comes to pensions, there are a few tax considerations to keep in mind. Firstly, you get tax relief on your contributions, which means that the government tops up your pension pot with extra money. The amount of tax relief you get depends on your income tax band.
Secondly, there are limits on how much you can save into a pension each year without incurring tax charges. These are known as pension allowances. The annual allowance for most people is currently £40,000, but this may be reduced if you have a high income.
Finally, when you come to take your pension, you may have to pay income tax on the money you receive. This is because your pension is treated as income for tax purposes. The amount of tax you pay will depend on your total income in retirement.
Taxation in Different Regions of the UK
When it comes to taxation in the UK, different regions have their own tax rates and allowances. Here’s a breakdown of the tax rates and allowances in each region.
England
In England, the basic rate of income tax is 20%, the higher rate is 40%, and the additional rate is 45%. The personal allowance for the tax year 2024-25 is £12,570. If you earn between £12,571 and £50,270, you’ll pay tax at the basic rate. If you earn between £50,271 and £150,000, you’ll pay tax at the higher rate. If you earn over £150,000, you’ll pay tax at the additional rate.
Scotland
Scotland has its own income tax rates, which are different from those in the rest of the UK. The starter rate is 19%, the basic rate is 20%, the intermediate rate is 21%, the higher rate is 41%, and the top rate is 46%. The personal allowance for the tax year 2024-25 is also £12,570. If you earn between £12,571 and £14,732, you’ll pay tax at the starter rate. If you earn between £14,733 and £25,688, you’ll pay tax at the basic rate. If you earn between £25,689 and £43,662, you’ll pay tax at the intermediate rate. If you earn between £43,663 and £150,000, you’ll pay tax at the higher rate. If you earn over £150,000, you’ll pay tax at the top rate.
Wales
In Wales, the tax rates are the same as those in England, but the Welsh government has the power to set its own rates of income tax. The personal allowance for the tax year 2024-25 is also £12,570.
Northern Ireland
In Northern Ireland, the tax rates are the same as those in the rest of the UK, but the Northern Ireland Assembly has the power to set its own rates of income tax. The personal allowance for the tax year 2024-25 is also £12,570.
Tax Considerations for Various Groups
If you are a self-employed individual, you will need to consider a few tax-related points. Firstly, you will need to pay Class 2 National Insurance contributions, which are currently set at £3.05 per week. You will also be required to pay Class 4 National Insurance contributions, which are calculated as a percentage of your profits between the lower profits limit and the upper profits limit. For the 2024/25 tax year, the Class 4 rate is set at 9%.
Share fishermen and volunteer development workers also have specific tax considerations to keep in mind. If you are a share fisherman, you will be taxed on your share of the profits of the fishing boat. The tax rate will depend on whether you are classified as a self-employed individual or an employee. Volunteer development workers, on the other hand, may be eligible for certain tax benefits, such as a reduction in their tax bill.
Non-residents may also need to consider their tax obligations. If you are a non-resident, you will only be taxed on income that is earned in the UK. You may also be eligible for certain tax reliefs, depending on your circumstances.
Here are a few key tax considerations for each group:
Self-Employed Individuals
- You will need to pay Class 2 and Class 4 National Insurance contributions.
- You may be eligible for certain tax reliefs, such as the annual investment allowance.
- You can use an income tax calculator to estimate your tax bill.
Share Fishermen and Volunteer Development Workers
- Share fishermen will be taxed on their share of the profits of the fishing boat.
- Volunteer development workers may be eligible for certain tax benefits.
Non-Residents
- You will only be taxed on income that is earned in the UK.
- You may also be eligible for certain tax reliefs, depending on your circumstances.
Tax Codes and Compliance
As a taxpayer, it is important to understand your tax code to ensure you are paying the correct amount of tax. Your tax code is used by your employer or pension provider to calculate how much tax to deduct from your pay or pension. You can find your tax code on your payslip or pension statement.
Understanding Your Tax Code
Your tax code is made up of numbers and letters and is usually based on your personal allowance. The standard personal allowance for the 2024/25 tax year is £12,570. This means that you can earn up to £12,570 before you start paying income tax. However, your tax code may be different depending on your circumstances. For example, if you receive child benefit, your tax code may be adjusted to take this into account.
Self-Assessment and Returns
Completing a self-assessment tax return is a crucial annual task for many. For a step-by-step guide on navigating this process, consider this thorough overview on how to complete your self-assessment tax return.
Inheritance Tax and Estate Planning
Inheritance tax is a tax on the estate (the property, money and possessions) of someone who has died. If you are the personal representative of someone who has died, you may need to pay inheritance tax on their estate. The amount of inheritance tax you pay will depend on the value of the estate and whether any exemptions or reliefs apply. The nil-rate band for the 2024/25 tax year is £500,000. This means that the first £500,000 of the estate is exempt from inheritance tax.
Overall, it is important to stay compliant with tax laws and regulations to avoid penalties and fines. If you have any questions or concerns about your tax code, self-assessment tax return, or inheritance tax, you should seek professional advice from a qualified tax advisor.
Yearly Changes and Updates
Tax Year Updates
As we embrace the new tax year, staying ahead of personal and business tax changes is critical for effective financial planning.
Threshold Adjustments and Rates
The standard employee personal allowance for the 2024 to 2025 tax year will be £12,570 per year, which is an increase from the previous tax year. The basic rate of income tax will remain at 20%, while the higher rate will remain at 40%. The additional rate of income tax will also remain at 45%.
The Class 2 National Insurance contributions for self-employed individuals will be abolished from April 2024, which is forecasted to benefit 1.9 million people in 2024-25. Meanwhile, the Class 4 National Insurance rate will fall from 9% to 8% on profits above £9,568.
Changes in Allowances
The pension lifetime allowance will increase to £1,250,000 from April 2024. The annual allowance for pension contributions will also remain at £40,000. The annual ISA allowance will remain at £20,000, while the Junior ISA allowance will increase to £10,000.
The dividend tax rate will remain at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers, and 38.1% for additional rate taxpayers.