[24.07.24]

We should like to remind clients that these are the tax allowances from 6th April 2024 until 5th April 2025.  We would encourage all clients to use their allowances where they are able.

Personal tax allowances – the standard personal allowance is £12, 570 before you pay income tax; the 20% Basic Tax Band is for income between £12,571 and £50,270; the 40% Higher Tax Band is for income from £50,271 and £125,140; and over £125,141 the tax band is the Additional Rate of 45%.  If your income is over £100,000 the personal allowance gradually reduces; and incomes over £125,140 do not receive the personal allowance.

Dividend allowance – for 2024/25 the dividend allowance has decreased to £500.  Whilst the tax rates for dividends is different, the tax bands are the same as above.  If your income, including your dividend, falls within the Basic Tax Band you pay 8.75% on dividends; if your income falls within the Higher Tax Band you pay 33.75% on dividends; and if your income falls within the Additional Tax Band you pay 39.35% on dividends.

Self-employed National Insurance Contributions – the amount you pay depends on your profits.  If your profits are £6,725 or more, Class 2 contributions are treated as paid to protect your National Insurance record.  If your profits are more than £12,570 a year, you must pay Class 4 contributions.  For tax year 2024 to 2025 you’ll pay 6% on profits of £12,570 up to £50,270; and 2% on profits over £50,270.   If your profits are less than £6,725 you do not have to pay anything but you can choose to pay Voluntary Class 2 Contributions.  The rate for 2024/2025 is £3.45 per week.

ISA allowance is the maximum you can put into your Individual Savings Accounts per tax year.  For the 2024/25 tax year, the maximum ISA allowance for adults is £20,000, of which £4,000 can be paid into a Lifetime ISA.  You can pay into more than one ISA in a tax year but you cannot exceed your £20,000 ISA allowance.   For Junior ISAs, the limit is £9,000.

Capital Gains Tax – the allowance for 2024/25 before you pay Capital Gains Tax is £3,000 or £1,500 for trusts. If you are a Basic Rate taxpayer you will pay 10% on your gains – 18% on residential property and carried interest.  If you are a Higher or Additional Rate taxpayer you will pay: 20% on your gains – 24% on residential property and 28% on your gains from carried interest if you manage an investment fund.

Trading Allowance was first introduced in 2017 as a way to support individuals earning a relatively low amount from casual trading or miscellaneous income.  The allowance is £1,000 for the 2024/25 tax year. It means that you can earn up to a total of £1,000 from self-employment or miscellaneous activity in a tax year, and won’t need to tell HMRC about it or pay tax on the income. This allowance applies to your gross income, before deducting tax and expenses.

Castletons Accountants