The UK’s income tax system has seen some changes over recent years, and understanding how the current rates work is key to managing your finances effectively. For the 2024/25 tax year, the income tax rates in England, Scotland, and Northern Ireland remain relatively stable, but with some significant details to note. This blog provides a breakdown of the tax bands, the latest rates, and what changes you can expect.
Income Tax Rates in England and Northern Ireland
For the 2024/25 tax year, the UK income tax system consists of three main tax bands for England, Wales, and Northern Ireland:
- Basic Rate: Income between £12,571 and £37,700 is taxed at 20%.
- Higher Rate: Income between £37,701 and £125,140 is taxed at 40%.
- Additional Rate: Income over £125,141 is taxed at 45%.
Income below the personal allowance threshold of £12,570 is not taxed, and this amount has been frozen until 2028. Additionally, the threshold for the additional rate was lowered starting in April 2023, which means higher earners will face the 45% rate at a lower income level. Both the personal allowance and additional rate thresholds are expected to remain the same until 2028.
Income Tax Rate Changes Over Recent Years
Looking at previous years, the personal allowance has stayed relatively stable:
- 2021/22: Personal allowance was £12,500, with basic rate up to £37,500, higher rate from £37,501 to £150,000, and additional rate over £150,001.
- 2022/23: The personal allowance increased slightly to £12,570, with no change in the other tax bands.
- 2023/24: The personal allowance remained at £12,570, but the higher rate threshold was reduced to £125,140, and the additional rate started at £125,141.
While the tax bands have remained consistent for the most part, it’s important to keep track of the thresholds to ensure you’re paying the correct amount of tax.
National Insurance Contributions (NICs)
National Insurance rates were adjusted to align with the personal allowance taper. For the 2024/25 tax year, the NICs rates are as follows:
- Employees: 8%
- Self-employed individuals: 6%
This reduction applies to both groups, making it easier for workers to manage their tax obligations alongside income tax.
Marriage Allowance
Married couples and civil partners in the UK may be eligible for the Marriage Allowance, which allows the lower-earning partner to transfer up to £1,260 of their personal allowance to the higher-earning partner. This can reduce the higher earner’s tax bill, as the income is taxed at a lower rate. The lower-earning spouse’s personal allowance is reduced to £11,310, with any income above that amount being taxed.
Income Tax Rates in Scotland
Unlike the rest of the UK, Scotland has a separate tax system with six income tax bands. For the 2024/25 tax year, Scottish residents will pay income tax according to the following bands:
- Starter Rate: Income between £12,571 and £14,876 is taxed at 19%.
- Basic Rate: Income between £14,877 and £26,561 is taxed at 20%.
- Intermediate Rate: Income between £26,562 and £43,662 is taxed at 21%.
- Higher Rate: Income between £43,663 and £75,000 is taxed at 42%.
- Advanced Rate: Income between £75,001 and £125,140 is taxed at 45%.
- Top Rate: Income over £125,140 is taxed at 48%.
A new advanced rate of 45% was introduced in April 2024, slightly altering the previous structure. The first four bands remain the same as in previous years.
Conclusion
As you prepare for the 2024/25 tax year, understanding the current tax rates and thresholds in both England and Scotland is essential for proper financial planning. With the personal allowance frozen until 2028 and several key rate changes in Scotland, it’s crucial to stay informed about how these changes will affect your tax obligations. If you have any concerns or need more detailed advice, consulting with a tax professional can help you navigate the complexities of the UK tax system.
