2024/25 Income Tax Rates and Personal Allowances
Income Tax Rates and Personal Allowances
The Income Tax you pay in each tax year depends on how much of your income is above your Personal Allowance and how much of your taxable income falls within each tax bands. Some income is tax free.
Personal Allowance
The standard personal allowance is £12,570 which is the amount of income you do not have to pay tax on. It decreases if your income is over £100,000, you lose £1 of your tax-free Personal Allowance.
Income Tax rates and bands
Personal Allowance - Up to £12,570 - 0%
Basic rate - £12,571 to £50,270 - 20%
Higher rate - £50,271 to £125,140 - 40%
Additional rate - over £125,140 - 45%
You do not get a Personal Allowance on taxable income over £125,140.
Income tax bands are different if you in live in Scotland.
Other Allowances
Personal Savings Allowance
You do not pay tax on interest earned up to the amount of your Personal Allowance. You may also get up to £1,000 of interest and not have to pay tax on it, depending on which Income Tax band you’re in. This is your Personal Savings Allowance:
Basic rate - £1,000 savings allowance
Higher rate - £500 savings allowance
Additional rate - £nil
You may also get up to £5,000 of interest and not have to pay tax on it. This is your starting rate for savings. The more you earn from other income, the less your starting rate for savings will be.
You will not be eligible for the starting rate for savings if your other income is £17,570 or more.
Dividend Allowance
You do not pay tax on any dividend income that falls within your Personal Allowance. You also get a dividend allowance each year of £500, you pay tax on any dividend income above the dividend allowance.
Dividend tax rates are different and depend on your Income Tax band.
Basic rate - 8.75%
Higher rate - 33.75%
Additional rate - 39.35%
Trading and Property Allowance
If you start working for yourself, you may need to report your incoem to HMRC. The trading allowance is a tax free allowance for casual and miscellaneous income of up to £1,000 per tax year. The allowance can be used against trading income, meaning that you do not pay income tax or National Insurance on the income covered by the allowance.
Similarly, the first £1,000 (unless you are using the Rent a Room Scheme) of your income from property rental is tax free. This is your property allowance.
