New tax rates for 2024/25

From your personal allowance to inheritance tax, everyone in the UK is taxed at some point in their

Updated: June 14, 2024
Rebecca Goodman

Written By

Rebecca Goodman

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From your personal allowance to inheritance tax, everyone in the UK is taxed at some point in their life, usually more than once, but tax bands change every year.

The amount of tax you pay will depend on a whole host of things, from your salary to if you’re in full time employment or you’re self employed.

These rates change, often yearly, so it’s important to know which tax bracket you’re in. If you end up paying the wrong level of tax, you may have to pay it back – or ask HMRC for a refund.

In this article we look at all of the new tax rates for the 2024/25 tax year including income tax, the personal allowance, and national insurance. 

How much income tax should I pay?

Everyone in the UK pays income tax on money they earn through a job. It goes towards lots of different things including the NHS, the police and fire service, and maintaining local parks and roads. They are given a personal allowance of £12,570 and anything over this they pay income tax on. Once their income reaches £100,000 the amount of personal allowance starts to reduce. 

There are three rates of tax paid in the UK. The 20% basic rate of tax, the 40% higher rate, and the 45% additional rate of tax. This applies to anyone in England, Wales or Northern Ireland. If you are self employed you still pay tax in this way but it’s paid through your self assessment tax return. 

The tax bands are as follows:

UK tax bands (for England, Wales and Northern Ireland)

How much you earnRate of tax
Under £12,570None
Between £12,570 and £50,27020%
Between £50,271 and £125,14040%
Over £125,14045%

If you live in Scotland there is a slightly different system for income tax. It is split into six different bands, as the following table demonstrates:

UK tax bands (for Scotland)

How much you earnRate of tax
Less than £12,570None
Between £12,570 and £14,87619%
Between £14,877 and £26,56120%
Between £26,562 and £43,66221%
Between £43,663 and £75,00042%
Between £75,001 and £125,14045%
More than £125,14048%

What is the personal allowance?

Everyone in the UK has their own personal allowance. This is the amount of money you can earn before you start paying income tax.

It is currently set at £12,570 and this is the amount most people will have for their personal allowance. You never pay tax on this amount of money, even if you earn more.

However, there are some circumstances whereby you may have a different personal allowance. If you earn between £100,000 to £125,140, your personal allowance is reduced by £1 for every £1 you earn between these figures. If you earn more than £125,140, your personal allowance is reduced to zero.

How much national insurance should I pay?

National insurance is separate from income tax although it works in a similar way. It pays for things like state benefits and the state pension.

It’s automatically taken off by most employers before you receive your wages. If you’re employed you will pay class 1 contributions and if you’re self-employed you will pay class 4 contributions, when you file your self-assessment tax return.

You start paying it when you turn 16 and stop when you reach the state pension age. 

In the table below you can see the different rates of national insurance in the UK:

Earnings if employed (not self-employed)Rate of national insurance
Under £12,570None
Between £12,570 and £50,2708%
More than £50,2702% on anything you earn over £50,270 

What about inheritance tax?

Another tax you may be thinking about is inheritance tax, or IHT. It is a tax on the estate of someone who has died, but only around 5% of the population pay it. It is set at 40% of everything above £325,000. However, there are some exemptions such as if you leave your estate to a spouse, you use a trust, or if you leave it to a charity or community organisation.     

How much capital gains tax should I pay?

Capital gains tax (CGT) is due when you sell or give away an asset worth more than £3,000, which is the limit for the 2024/25 tax year. 

The gain is taxed, not the amount of money you receive. If you bought a painting for £1,000, for example, and sold it for £10,000, your gain is £9,000.  

It’s not paid on everything, just the following:

  • Personal possessions worth £6,000 or more
  • Property that isn’t your main home
  • Shares that aren’t in an ISA or PEP
  • Business assets
  • Your main home – if you have let it out, you’re using it for business, or it’s very large

There’s a full list on the gov.uk website of what CGT applies to. 

If you give or sell assets to a spouse or civil partner, you don’t pay CGT unless you are separated and don’t live together that tax year or the assets were sold on via the other person’s business. If you think you will exceed the £3,000 annual limit, you could give the assets to your partner to avoid paying CGT.  

Here are the rates for the 2024/25 tax year:

Rates of CGT for April 2024 to April 2025

RateAssetsResidential property
Standard10%18%
Higher20%24%

How much dividend tax should I pay?

If you receive dividends you will need to pay tax on them, if they exceed the yearly limit. Dividends are often paid if you own shares in a company but you don’t pay any that fall within your personal allowance. You don’t pay tax on dividends that are held in an ISA and you will only pay the tax on dividends you receive above the allowance.  

The current allowance is £500, which was introduced in April 2024. Before that the amount was £1,000. If you earn dividends above the £500 limit, you will need to tell HMRC.

How much you pay in dividend tax depends on how much you earn, and your income tax band. The table below shows the different rates:

Dividend tax rates (above the £500 limit)

Tax rateDividend tax applied
Basic rate8.75%
Higher rate33.75%
Additional rate39.35%

How much tax will I pay on a pension?

Pensions offer attractive tax breaks and if you’re a basic rate taxpayer, you will receive 20% tax relief on anything you put into your pension. For higher rate taxpayers it’s 40% tax relief and this rises to 45% for additional taxpayers.

The tax break is usually only applied to the first £60,000 you put into your pension each year. This is the annual allowance, and it hasn’t changed this year. 

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