Current Tax Rates and Allowances in the UK [2024]

UK tax rates 2024 remain the same as last year, per the latest Autumn Budget. The only significant change is in the employers’ National Insurance rates, which will take effect in 2025. Learn about the current tax rates and allowances here.  

Personal Tax Allowance UK 2024

The tax-free allowance UK, also known as Personal Allowance, remains at £12,570.

Get a closer look at the UK income tax bands:

• Basic Rate Band: Still capped at £50,270, this band sees no upward adjustment, meaning more taxpayers may face ‘bracket creep’ due to inflationary income growth. This effectively raises the marginal tax burden for those close to the next threshold, increasing tax revenue without explicit rate hikes.
• Higher Rate Band: For 2024, income from £50,271 to £125,140 is subject to a 40% rate. With no indexation for inflation, taxpayers moving into this band will experience an effective increase in tax on earnings, a stealth tax that’s impactful on net income. This lack of adjustment encourages strategic income deferral or restructuring for individuals near this threshold to mitigate exposure.
• Additional Rate Threshold Reduction: The additional rate of 45% applies to £125,140. Formerly, the threshold was £150,000. High-income earners should consider this shift in relation to deferral strategies, employer pension contributions, and any avenues for income splitting within households to remain below this threshold, where feasible.

Key Takeaway: The freeze on tax threshold UK, particularly at the higher rate, places additional emphasis on income planning. Professionals earning near these limits should review their income allocation to optimize post-tax income.

Capital Gains Tax Allowance and Inheritance Planning

The UK capital gains tax allowance has decreased to £3,000 for most assets and £1,500 for trusts, down from £6,000, significantly narrowing the scope for tax-free gains. This impacts investors and property owners, increasing the need for effective planning around asset disposal and inheritance. If you’re managing significant assets, it’s wise to consider inheritance tax implications alongside capital gains. Consulting with an inheritance tax specialist can help you navigate both CGT and inheritance tax obligations, maximizing tax efficiency and preserving more of your wealth for future generations.

Capital Gains Rates and Strategic Approaches

For basic-rate taxpayers, the rate is 18%, and for higher-rate taxpayers, it’s 24%. However, with the halved tax-free allowance, more of these gains will now be taxable, especially for investors accustomed to offsetting smaller gains within the previous threshold.

Strategies for Mitigating CGT:

Utilize ISA Wrappers: For those holding stock-based investments, maximizing ISA contributions to shield capital gains becomes even more valuable in the current landscape.

Asset Disposal Planning: Staggering disposals over multiple tax years and using spousal allowances for asset transfers can help maximize combined allowances, particularly for married couples.

Charitable Contributions: Redirecting portions of gains towards charitable donations can reduce taxable capital gains, leveraging tax reliefs strategically.

Corporation Tax Rate: Marginal Relief and SME Implications

In 2024, UK corporation tax rate continues to vary by profit, with a top rate of 25% for profits above £250,000 and a small profits rate of 19% for those under £50,000. This two-tier system includes marginal relief for profits between £50,001 and £250,000, introducing a graduated effective tax rate that may be advantageous for small and mid-sized enterprises (SMEs).

Implications for Business Strategy:

1. Profit Management: Businesses on the cusp of the £50,000 threshold should assess if profit deferral or reinvestment strategies could keep them within the small profits rate, thereby reducing corporate tax liabilities.
2. Marginal Relief Optimization: For SMEs with profits within the marginal range, the effective tax rate gradually increases from 19% to 25%, creating a blended tax burden that may warrant revisiting expense strategies and capital investments to stay at an optimal tax rate.

National Insurance Rates UK: Key Thresholds and Their Financial Implications

National Insurance (NI) contributions remain a significant financial consideration for both employees and employers in the UK. Here’s an overview of NICs for employees and self-employed individuals:

Employees: 

• For the 2024/25 tax year, employees will pay 12% on earnings between £242 and £967 a week, and 2% on earnings above £967 weekly.

Self-Employed Individuals:

• Self-employed workers generally pay Class 2 contributions, a flat rate of £3.45 a week if their profits exceed £12,570 annually.
• They may also pay Class 4 contributions, calculated as a percentage of their profits: 9% on profits between £12,570 and £50,270, and 2% on profits above £50,270.

Employers, Stay Updated! Per the Autumn Budget 2024, employers will pay an additional 1.2%, from 13.8% to 15%. This will take effect beginning April 2025.

Strategic Tax Planning in 2024

As the UK tax landscape continues to shift, it presents both challenges and opportunities. At Legend Financial, we make sure you are not just adapting to these changes but actively leveraging the current tax rates and allowances to your advantage. Our tax services will help you strategically structure your finances, optimizing income while fully utilizing all available allowances and reliefs.

Put your financial future in the hands of trusted professionals.

Stay for latest new and updates: Touchcric