UK Tax Allowances and Rates for 2024/25 – and useful tax calculators

The UK tax system has a range of allowances and rates that apply to individuals and businesses. Understanding these can help you accurately calculate tax liabilities including your net take-home pay. Below is an overview of the most important tax allowances and rates for the 2024/25 tax year.

1. Personal Allowance

• Standard Personal Allowance: £12,570 if you are entitled to the full allowance
  • This is the amount of income you can earn before you start paying income tax.
  • For incomes over £100,000, the Personal Allowance is reduced by £1 for every £2 earned above this threshold. You therefore don't get a personal allowance if you earn over £125,140.
• Marriage Allowance: Up to £1,260
  • This allows a lower-earning spouse or civil partner to transfer up to £1,260 of their unused Personal Allowance to their partner, provided the recipient does not pay higher-rate tax.
• Blind Person’s Allowance: £2,870
  • Additional allowance for individuals registered as blind.

2. Income Tax Rates

• Personal allowance (0%): Income up to £12,570 as long as you earn £100k or under. On incomes over £100,000, the Personal Allowance is reduced by £1 for every £2 earned above this threshold. You therefore don't get a personal allowance if you earn over £125,140.
• 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.

Useful income tax calculator for calculating take home pay - income tax calculator

3. National Insurance Contributions (NICs)

• Class 1 NICs (Employees):
  • Primary Threshold: £12,570 (annual)
  • Rate on Earnings Between £12,570 and £50,270: 12%
  • Rate on Earnings Above £50,270: 2%
• Class 4 NICs (Self-Employed):
  • Lower Profits Limit: £12,570
  • Rate on Profits Between £12,570 and £50,270: 9%
  • Rate on Profits Above £50,270: 2%
• Class 2 NICs (Self-Employed): Flat rate of £3.45 per week if profits are above the Small Profits Threshold of £6,725.

4. Dividend Tax Rates

• Dividend Allowance: £1,000 – The first £1,000 of dividends is tax-free.
• Dividend Tax Rates:
  • Basic Rate (8.75%): Dividends within the basic rate band.
  • Higher Rate (33.75%): Dividends within the higher rate band.
  • Additional Rate (39.35%): Dividends within the additional rate band.

Useful dividend tax calculator

5. Capital Gains Tax (CGT)

• Annual Exempt Amount: £3,000 – This is the amount of capital gains you can make before you start paying CGT.
• CGT Rates for Residential Property:
  • Basic Rate Taxpayers: 18%
  • Higher and Additional Rate Taxpayers: 28%
• CGT Rates for Other Assets:
  • Basic Rate Taxpayers: 10%
  • Higher and Additional Rate Taxpayers: 20%

Useful capital gains tax calculator

6. Inheritance Tax (IHT)

• Nil-Rate Band: £325,000 – This is the threshold up to which an estate is free from inheritance tax.
• Rate on Excess Over the Nil-Rate Band: 40%
  • 36% if 10% or more of the estate is left to charity.
• Residence Nil-Rate Band (RBRB): £175,000 – An additional allowance for passing on a main residence to direct descendants which means children or grandchildren. The descendants have to be 'direct' and so excludes brothers, sisters, nieces and nephews. Also if the deceased's a net estate over £2million their  RNRB will be reduced by £1 for every £2 over this threshold.
• Spousal Inheritance of IHT Allowances: If one spouse or civil partner dies and leaves their estate to the surviving spouse, the unused portion of the deceased's Nil-Rate Band and Residence Nil-Rate Band can be transferred to the surviving spouse. This effectively doubles the available allowances for the surviving spouse’s estate, potentially increasing the Nil-Rate Band to £650,000 and the Residence Nil-Rate Band to £350,000.

Useful inheritance tax calculator

7. Pension Contributions

• Annual Allowance: £60,000 – This is the maximum amount you can contribute to your pension each year and still receive tax relief.
• Tapered Annual Allowance: For high earners with an adjusted income over £260,000, the annual allowance is reduced by £1 for every £2 of income over this threshold, down to a minimum of £10,000.
• Money Purchase Annual Allowance (MPAA): If you have accessed your pension savings flexibly (e.g., through a drawdown or lump sum withdrawal), the MPAA may apply, reducing your annual allowance to £10,000.
  • Note that the Money Purchase Annual Allowance (MPAA) is triggered when you access your pension savings flexibly. However, there are specific situations where accessing your pension won't trigger the MPAA:
    • Taking a Small Lump Sum:
      • You can withdraw up to three small lump sums (also known as "small pots") of up to £10,000 each from non-occupational defined contribution pensions without triggering the MPAA.
    • Taking a Pension Commencement Lump Sum (PCLS) (25% tax-free lump sum):
      • If you only take the 25% tax-free lump sum and leave the rest of your pension pot untouched, the MPAA will not be triggered.
    • Drawing from a Defined Benefit (Final Salary) Pension:
      • Taking income from a defined benefit pension scheme (such as a final salary or career average scheme) does not trigger the MPAA.
    • Capped Drawdown (Pre-April 2015):
      • If you were in a "capped drawdown" arrangement before April 2015 and continue to take income within the capped limits, the MPAA is not triggered.
    • Taking a Lifetime Annuity:
      • Purchasing a lifetime annuity that provides a guaranteed income for life does not trigger the MPAA, as long as it’s not a flexible annuity.
    • Receiving a Scheme Pension:
      • Receiving a scheme pension, such as one provided by a defined benefit pension, does not trigger the MPAA.
    • Taking Ill-Health Retirement:
      • If you take your pension early due to ill health (and meet the requirements for ill-health retirement), the MPAA will not automatically apply unless you access it through flexible arrangements.
• Lifetime Allowance: Abolished from April 2024 – There is no longer a cap on the total amount you can accumulate in your pension without facing additional tax charges.
• Contributions for Non-Earners: Non-earners can contribute to a pension and still receive tax relief. The maximum gross amount a non-earner can contribute is £3,600 annually.
  • Net Contribution: £2,880 (the amount the individual actually pays).
  • Tax Relief: £720 (added by the government).
  • Gross Contribution: £3,600 (the total amount that goes into the pension, including tax relief).
• Tax Relief on Contributions:
  • Basic rate taxpayers: 20% tax relief.
  • Higher rate taxpayers: 40% tax relief (with the additional 20% claimed through self-assessment).
  • Additional rate taxpayers: 45% tax relief (with the additional 25% claimed through self-assessment).

8. VAT (Value Added Tax)

• Standard Rate: 20% – Applies to most goods and services.
• Reduced Rate: 5% – Applies to certain goods and services, such as home energy.
• Zero Rate: 0% – Applies to essential items like food and children's clothing.

9. Corporation Tax

• Main Rate: 25% – For companies with profits above £250,000.
• Small Profits Rate: 19% – For companies with profits up to £50,000.
• Marginal Relief: Companies with profits between £50,000 and £250,000 will pay tax at a rate between 19% and 25%, depending on the level of profits.

10. Property Taxes

• Stamp Duty Land Tax (SDLT) for Residential Properties in England & Northern Ireland:
  • 0% on the first £250,000.
  • 5% on the portion between £250,001 and £925,000.
  • 10% on the portion between £925,001 and £1.5 million.
  • 12% on the portion above £1.5 million.
• First-Time Buyer Stamp Duty Relief:
  • Eligibility: Applies to individuals purchasing their first residential property. The property must be purchased outright or with a mortgage, and cannot exceed £625,000.
  • Relief Structure:
    • 0% on the first £425,000.
    • 5% on the portion between £425,001 and £625,000.
  • Example:
    • If a first-time buyer purchases a property for £300,000: SDLT would be 0% on the entire amount, resulting in no SDLT payable.
    • If a first-time buyer purchases a property for £500,000:
      • 0% on the first £425,000 = £0
      • 5% on the remaining £75,000 = £3,750
      • Total SDLT: £3,750
• Additional SDLT Rules:
  • Purchasing additional properties, such as buy-to-let or second homes, will attract an extra 3% SDLT on top of the standard rates.

Useful stamp duty calculator

• Council Tax: Varies depending on the property’s valuation band and local authority rates.