UK Income Tax Rates and Bands
Taxation and Accounting firms in the UK have got you covered! This tax season, ensure your tax compliance and use the UK income tax calculator to avoid the hassle of filing and calculations.
The UK financial system includes a wide variety of tax brackets, allowances, and earnings thresholds that are applicable to individuals and organizations. Businesses, especially, must always be aware of the Government’s requirements to stay in line and prevent any legal actions from HMRC.
The UK tax system can be confusing to navigate without a thorough grasp of the rules and regulations. We have compiled a detailed overview of the UK’s personal and corporate tax laws for the 2024/25 and 2023/24 tax years to assist you in getting ahead.
Individual Taxation
There are two primary categories for tax-exempt allowances.
- Allowances refer to the income threshold where the Government does not require you to pay any taxes.
- Tax relief: In addition to the basic threshold, there are further relief options depending on various personal situations.
| Allowances | 2024/25 | 2023/24 | 2022/23 | 2021/22 | 2020/21 |
| Personal Allowance | £12,570 | £12,570 | £12,570 | £12,570 | £12,500 |
| Income limit | £100,000 | £100,000 | £100,000 | £100,000 | £100,000 |
What impact does the Personal Allowance have on self-employed individuals?
If you work for yourself, you get the same tax-free Personal Allowance as someone who works for a company. If you have two jobs, with one being self-employed, there are some factors to take into account. The UK Government tax regulations specify that a Personal Allowance can only be used for one job. Using your Personal Allowance on the job that gives you the highest income is a common practice. If your main job income is fully covered by the Personal Allowance, you will be taxed on all earnings from your second job. If you have two jobs and each pays less than £12,570, you can divide your Personal Allowance between them. One simple method to determine the application of your Personal Allowance with two jobs is to check the tax code on your pay slip.
1250L – Considered as your primary responsibility.
BR, D0 or D1 – Considered as your second occupation.
Tax on savings income & Personal Savings Allowance
The Government permits individuals to generate income from their savings, through interest, without being subjected to a specific tax amount.
| Band | Taxable income | Tax rate |
| 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% |
Income limit for Personal Allowance = £125,140
Contributions made to National Insurance
Employees and self-employed individuals may be required to make National Insurance contributions (NICs). National Insurance Contributions (NICs) fund state benefits like state pension, statutory sick pay, and maternity leave, as well as eligibility for extra unemployment benefits when applicable.
Self-employed individuals, specifically sole traders, are required to pay both Class 2 and Class 4 National Insurance contributions based on their profit levels. NICs are only due once profit thresholds have been met.
Class 2
| 2024/25 | 2023/24 | 2022/23 | 2021/22 | 2020/21 | 2019/20 | 2018/19 | |
| Small Profits Threshold (per year) | £6,725 | £6,725 | £6,725 | £6,515 | £6,475 | £6,365 | £6,205 |
| Rate per week | £3.45 | £3.45 | £3.15 | £3.05 | £3.05 | £3.00 | £2.95 |
Starting on April 6, 2024, the self-employed National Insurance (Class 4 NICs) will decrease by 3% from 9% to 6% for profits between £12,570 to £50,270, with the upper profits rate remaining at 2%.
Beginning on April 6, 2024, self-employed individuals making profits exceeding £12,570 will not have to pay Class 2 NICs anymore, while still being eligible for contributory benefits like the State Pension.
This tax simplification eliminates Class 2 NICs for self-employed individuals by eliminating the need for payment.
Individuals earning an income ranging from £6,725 to £12,570 will still be eligible for benefits such as the State Pension by receiving National Insurance credits, without having to make National Insurance contributions like they currently do.
Individuals earning less than £6,725 in profits and those who choose to pay Class 2 NICs to receive contributory benefits like the State Pension can still do so. The amount they will pay per week will remain at £3.45 throughout 2024-25.
Class 4
| 2024/25 | 2023/24 | 2022/23 | 2021/22 | 2020/21 | 2019/20 | 2018/19 | |
| Lower Profits Limit (after which Self-employed people start paying Class 4 NICs) |
£12,570 | £12,570 | £11,908 | £9,568 | £9,500 | £8,632 | £8,424 |
| Upper Profits Limit (after which the self-employed pay a lower rate) |
£50,270 | £50,270 | £50,270 | £50,270 | £50,000 | £50,000 | £46,350 |
| Rate between Lower Profits Limit and Upper Profits Limit |
6% | 9% | 10.25% | 9% | 9% | 9% | 9% |
| Rate above Upper Profits Limit |
2% | 2% | 3.25% | 2% | 2% | 2% | 2% |
Dividend Allowance
If you possess stocks in a corporation, you are entitled to receive dividends. If you establish a limited company and opt to receive payment through salary and dividend, you can receive dividend payments on a monthly or bi-monthly basis, providing a more tax-efficient method of payment for yourself.
You are not required to pay taxes on dividend income that is below your Personal Allowance, the maximum income you can earn annually tax-free. Every year, you receive a dividend allowance and are only taxed on dividend income exceeding that allowance. Below is the detailed information regarding the dividend allowance.
| Tax year | Dividend allowance |
| 6 April 2024 to 5 April 2025 | £500 |
| 6 April 2023 to 5 April 2024 | £1,000 |
| 6 April 2022 to 5 April 2023 | £2,000 |
Taxing dividends
The tax you owe on dividends exceeding the dividend allowance is determined by your Income Tax bracket.
| Tax band | Tax rate on dividends above the allowance |
| Basic rate | 8.75% |
| Higher rate | 33.75% |
| Additional rate | 39.35% |
For 2023/24 you will be taxed as follows:
| Tax band | Tax rate on dividends above the allowance |
| Basic rate | 8.75% |
| Higher rate | 33.75% |
| Additional rate | 39.35% |
For 2022/23 you will be taxed as follows:
| Tax band | Tax rate on dividends above the allowance |
| Basic rate | 8.75% |
| Higher rate | 33.75% |
| Additional rate | 39.35% |
UK Income Tax Calculator
A tax calculator is a helpful tool for estimating and comprehending your tax liability. When discussing UK Income Tax, we are specifically talking about an online tool for calculating Self-Assessment taxes. Essentially, this is software (usually free) that helps you understand your individual tax responsibilities to HMRC.
What advantages does an income tax calculator offer?
Determining if you have to pay taxes (and how much) can be perplexing under any circumstances. When submitting your tax forms, the variety of financial elements included can sometimes seem daunting. Fortunately, there is Self-Assessment software that can assist in understanding the numbers and finding errors.
Online tax calculators generate a detailed breakdown of your Income Tax obligations based on your personal situation. This analysis illustrates the variety of factors that increase or decrease your overall tax liability. This can be extremely helpful when getting ready for your Self-Assessment for HMRC.
Utilizing Self-Assessment software like this enhances the transparency of taxes. By giving you a detailed analysis of your specific tax factors, it enables you to manage and comprehend the processes behind taxation. You can do all of this without having to pay anything, which is the most advantageous aspect.
Taxation and Compliance Services in London, UK
For all companies, navigating the rough tides of taxation is critical. The worst part about handling tax is the ever-changing tax compliance rules.
This is where the expertise of our professional accountants comes in. As a top consultancy in London, we, at SSCOGlobal offer comprehensive tax compliance services in the UK. With us, managing your company taxes will never be a problem.