UK Tax & National Insurance Allowances for 2024/2025: Key Figures

For the UK tax year 2024/2025, the government has generally maintained many of the tax allowances from previous years, with some changes.

Here are the key personal tax allowances:

1. Personal Allowance:

  • £12,570 – This is the amount of income you can earn before paying income tax.
If your income exceeds £100,000, the Personal Allowance is gradually reduced by £1 for every £2 above that threshold, meaning it is completely lost if your income exceeds £125,140.

    2. Income Tax Bands (England, Wales, Northern Ireland):

    • Basic Rate (20%): Income between £12,571 and £50,270.
    • Higher Rate (40%): Income between £50,271 and £125,140.
    • Additional Rate (45%): Income over £125,140.

    3. Income Tax Bands (Scotland):

    Scotland has a slightly different set of tax bands:

    • Starter Rate (19%): Income between £12,571 and £14,732.
    • Basic Rate (20%): Income between £14,733 and £25,688.
    • Intermediate Rate (21%): Income between £25,689 and £43,662.
    • Higher Rate (42%): Income between £43,663 and £125,140.
    • Top Rate (47%): Income over £125,140.

    4. Marriage Allowance:

    • £1,260 – You can transfer up to £1,260 of your Personal Allowance to your spouse or civil partner if they earn less than the Personal Allowance and you earn between £12,571 and £50,270.

    5. Blind Person’s Allowance:

    • £2,870 – Available for individuals who are registered as blind.

    6. National Insurance Contributions:

    • The Primary Threshold (the point at which employees start paying National Insurance) is £12,570 per year, aligning with the Personal Allowance.
    • The rates for employees are:
      • 12% on earnings between £12,570 and £50,270.
      • 2% on earnings above £50,270.

    7. Dividend Allowance:

    • £500 – Reduced from previous years, this is the amount of dividend income you can receive before paying tax.
      • Tax rates on dividends are:
        • 8.75% for basic-rate taxpayers.
        • 33.75% for higher-rate taxpayers.
        • 39.35% for additional-rate taxpayers.

    8. Capital Gains Tax (CGT) Allowance:

    • £3,000 – The annual exempt amount for Capital Gains Tax (reduced from previous years). Gains above this threshold are taxed at:
      • 10% (basic rate) and 20% (higher rate) for most assets.
      • 18% (basic rate) and 28% (higher rate) for residential property.

    9. Pension Annual Allowance:

    • £60,000 – The maximum amount you can contribute to a pension each year and still receive tax relief (or up to your annual earnings if they are lower).

    10. Inheritance Tax:

    • £325,000 – The Nil-Rate Band for Inheritance Tax remains at £325,000.
    Additionally, the Residence Nil-Rate Band of £175,000 is available when passing on a primary residence to direct descendants.

      11. Savings Allowance:

      • £1,000 – Tax-free savings allowance for basic rate taxpayers.
      • £500 – For higher-rate taxpayers.
      • £0 – For additional-rate taxpayers.

      These figures are generally fixed by the UK government and apply for the tax year running from 6 April 2024 to 5 April 2025.

       

      National Insurance Contributions (NICs) are payments made by both employees and employers in the UK to fund various state benefits, including the state pension and certain types of social security. The National Insurance bands for the 2024/2025 tax year are set out below:

      National Insurance for Employees (Class 1 Contributions):

      1. Employee (Primary) Contributions:

      These contributions are deducted from an employee’s salary, and they are based on their earnings.

      • Lower Earnings Limit (LEL): £6,396 per year (£123 per week)
        • Employees earning between this and the Primary Threshold do not pay NICs but are still treated as having paid NICs, meaning they build up entitlements to benefits (such as the State Pension).
      • Primary Threshold (PT): £12,570 per year (£242 per week)
        • This is the point at which employees start paying National Insurance.
      • Upper Earnings Limit (UEL): £50,270 per year (£967 per week)
      Earnings above this are subject to a lower rate of NICs.

        Employee NIC Rates:

        • 12% on earnings between £12,570 and £50,270 (between the Primary Threshold and the Upper Earnings Limit).
        • 2% on earnings above £50,270.

        For example, if you earn £60,000 a year, you will pay:

        • 12% on the portion of your income between £12,570 and £50,270.
        • 2% on the portion of your income above £50,270.

        2. Employer (Secondary) Contributions:

        Employers also pay NICs on the earnings of their employees. These contributions are not deducted from the employee's salary but are paid directly by the employer.

        • Secondary Threshold (ST): £9,100 per year (£175 per week.
          • Employers do not have to pay NICs on earnings below this threshold.
        • Employer NIC Rate:
          • 13.8% on all earnings above £9,100 (no upper limit).

        Employers pay 13.8% NICs on earnings above the Secondary Threshold, which applies to all employees regardless of how much they earn.

        3. National Insurance for Self-Employed (Class 2 and Class 4 Contributions):

        Self-employed individuals pay two types of NICs: Class 2 and Class 4.

        • Class 2 Contributions:
          • Flat rate of £3.45 per week if profits are above the Small Profits Threshold of £12,570.
          • No Class 2 NICs are due if profits are below £12,570, but self-employed individuals can opt to pay voluntarily to preserve entitlement to certain benefits, including the state pension.
        • Class 4 Contributions:
          • 9% on profits between £12,570 and £50,270.
          • 2% on profits above £50,270.

        4. National Insurance for Directors:

        Company directors are also liable to pay National Insurance, but their contributions are calculated differently because they are typically paid annually, even if their income is drawn monthly.

        5. National Insurance for Employers (Employment Allowance):

        Employers can claim up to £5,000 per year as Employment Allowance to offset the amount of NICs they pay.

        This is particularly useful for small businesses and reduces their overall NIC liability.

        However, it’s only available to certain businesses, typically smaller businesses or charities with a NIC liability of less than £100,000.

        Summary of Employee and Employer NIC Rates (2024/2025):

        • Employee National Insurance:
          • 12% on earnings from £12,570 to £50,270.
          • 2% on earnings above £50,270.
        • Employer National Insurance:
          • 13.8% on all earnings above £9,100 (with no upper limit).

        Understanding these thresholds and rates is crucial for both employees and employers to ensure correct deductions are made and liabilities are met.

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