2024/25 tax brackets: how much will you pay?

Tax years run from 6th April one year to 5th April the next. Each year, rates of tax can change as can the various limits and allowances that help reduce the amount you pay. Here’s a handy round up of the UK tax brackets and allowances for the current tax year (2024/25).

2024/25 tax brackets

1. Income tax

You pay income tax at the rates applicable to the parts of your earnings that fall within several brackets or ‘bands’. As it currently stands, these income tax thresholds are frozen, until April 2028. This means people will pay more tax as their wages or other income rises.

The income tax rates for England, Wales, and Northern Ireland in the tax year 2024/25 are:

• Personal allowance at 0%: Up to £12,570
• Basic tax rate at 20%: From £12,571 to £50,270
• Higher tax rate at 40%: From £50,271 to £125,140
• Additional tax rate at 45%: Above £125,141

Higher earners should note that the income tax Personal Allowance, on which no tax is paid, is reduced for those earning over £100,000. For every £2 that you earn above £100,000, the Personal Allowance reduces by £1. This means if you earn £125,140 or more, your personal tax allowance is zero.

Please note rates of income tax on earned income are different in Scotland.*

• Personal allowance at 0%: Up to £12,570
• Starter rate at 19%: From £12,571 to £14,876
• Basic rate at 20%: From £14,877 to £26,562
• Intermediate rate at 21%: From £26,563 to £43,662
• Higher tax rate at 42%: From £43,663 to £75,000
• Advanced rate tax at 45%: From £75,001 to £125,140*
• Top rate tax at 48%: Above £125,140

*In Scotland, those earning more than £100,000 also see their Personal Allowance reduced by £1 for every £2 earned over £100,000. This means those that fall within the top rate of tax (earning more than £125,140), have no personal tax allowance.

2. Dividend income tax rates and dividend allowance

For all UK taxpayers the first slice of dividend income in each tax year requires no additional payment of tax – this is known as the Dividend Allowance. For the 2024/25 tax year it is £500, half of what it was in 2023/24.

Dividends received above this allowance are taxed according to which rate of income tax you pay. You can work out which tax band you’re in by adding the total amount of your dividend income to your other income in the same tax year. The income tax rates on dividends are as follows:

• Basic rate taxpayers 8.75%
• Higher rate taxpayers 33.75%
• Additional rate taxpayers 39.35%

The Dividend Allowance is separate to the income tax personal allowance described above and the personal savings allowance (see below). Dividends from shareholdings outside of an ISA or pension and in excess of your personal and dividend allowances are taxable.

For those interested in the topic, I've also written about investing with dividends - or you can follow the link for more information on UK dividend tax rates.

3. Personal savings allowance and starter rate for savings

The personal savings allowance grants every basic-rate taxpayer £1,000 of savings income free from income tax, with higher-rate taxpayers receiving a £500 allowance. Additional-rate taxpayers on the top 45% income tax rate receive no allowance.

Interest from sources that are already tax free, such as assets held in ISAs and Premium Bond 'winnings', don’t count towards the allowance. Yet some investments do, including holdings of gilts and corporate bonds, as well as unit trusts, OEICs and investment trusts that invest predominantly in bonds and pay interest as opposed to dividend income.

If your total income is less than £17,570 that tax year, there is a starter rate for savings of up to £5,000 a year on which no tax is payable . Every £1 of other income above the Personal Allowance reduces the starting rate ‘band’ by £1. There are some examples of how this works on the HMRC website here.

4. Capital Gains Tax allowance

The capital gains tax ‘annual exempt amount’ is the maximum profit you can make on selling or disposing of assets without paying capital gains tax. The allowance is £3,000 for the 2024/25 tax year, slashed from £6,000 in 2023/24 and £12,300 in 2022/23.

The rates payable on Capital Gains Tax are 10% basic rate and 20% higher rate, but on residential property (other than your own home) the rates are 18% and 24% respectively for 2024/25. Your rate of capital gains tax will depend on your other taxable income. See the HMRC website for more information.

5. ISAs

This tax year’s ISA allowance remains at £20,000. It is available to UK residents over 18, the main options being a Cash ISA and a Stocks & Shares ISA. You can split your allowance between these if you wish, the stipulation being that you can only contribute through one provider of each type of ISA each tax year. Charles Stanley only offers Stocks & Shares ISAs.

Investments in an ISA are sheltered from capital gains tax and income tax. By investing early in the tax year you have up to a year’s worth of extra income and growth potential – though your investment could fall over this period rather than rise. Remember, annual ISA allowances cannot be carried forward.

ISA

6. Junior ISAs

The Junior ISA (JISA) allowance remains at £9,000 in 2024/25. A parent or legal guardian of an eligible child can open a Junior Stocks & Shares ISA, manage the account, and make the investment decisions. Grandparents, relatives or family friends can then also contribute at any time up to the annual investment limit.

Junior ISA

7. Pensions

The maximum that can be contributed to all your pensions (known as the 'annual allowance') remains at £60,000 in 2024/25. Income tax relief on personal contributions is also generally limited to 100% of your relevant UK earnings for the tax year.

Currently, an investor can receive up to 45% tax relief when they make a personal contribution to a personal pension such as a SIPP, with 20% tax relief paid by HMRC into the pension. Any higher and additional rate tax relief can be reclaimed thorough your self-assessment form. Please note rates of tax and pension tax relief for Scottish taxpayers are different from the rest of the UK.

Subject to sufficient earnings in the tax year, individuals contributing to a pension, including SIPPs, are able to carry forward and contribute unused annual allowances from the three previous tax years.

For people who receive taxable ‘flexible’ retirement benefits, such as income or lump sums from pension drawdown, a lower annual allowance applies known as the Money Purchase Annual Allowance or MPAA, which is £10,000 for the 2024/25 tax year.

For high earners, the annual allowance is reduced on a gradual basis down to a minimum of £10,000 in 2024/25, but this is only a concern for those whose earnings and income are, very broadly, over £200,000 a year – for more information refer to the HMRC website here.

Non-taxpayers can still benefit from pension tax relief although it is limited. Eligible individuals under age 75 can contribute up to £2,880 to a pension and receive tax relief of £720, resulting in a total contribution of £3,600 irrespective of earnings.

The cap on the total value of your pensions from which you can draw benefits without triggering a tax charge (known as the Lifetime Allowance) no longer applies, but the maximum tax-free cash that can be taken from pensions is still generally calculated in reference to it. For most people the limit is 25% of the standard Lifetime Allowance of £1,073,100, or £268,275.

SIPP

8. Inheritance Tax

Inheritance tax continues to be charged at 40% of a person’s estate above a tax-free allowance – also called the nil-rate band – of £325,000. Currently, the inheritance tax (IHT) threshold is frozen until April 2028.

It means more people will have to pay IHT as a greater number of estates tip over the tax threshold, thanks largely to rising house prices. Careful planning is often required, not just by the wealthy but numerous families who consider their situation quite ordinary and might not anticipate the impact.

Try our IHT calculator to find out how much tax your beneficiaries might have to pay or speak to our planners to explore how we can help you find efficient ways to pass on your wealth to others.

Inheritance tax calculator

The tax treatment of pensions depends on individual circumstances and may be subject to change in future.