Overview
Taxes are ever changing and confusing. That's why I built this comprehensive personal tax guide detailing the most common taxes you are likely to come across and how they work!
Income Tax Rates and Personal Allowances
Personal Allowance: The standard threshold before you are liable to pay income tax remains at £12,570. This means you don't pay tax on income up to this amount.
Income Tax Bands:
Basic Rate: Income between £12,571 and £50,270 is taxed at 20%.
Higher Rate: Income between £50,271 and £125,140 is taxed at 40%.
Additional Rate: Income over £125,140 is taxed at 45%.
The income tax bands are different if you live in Scotland, with more granular bands and rates applied.
National Insurance Contributions (NICs)
NICs are payments made by employees and employers into the UK's National Insurance, which funds state benefits. The rates and thresholds for NICs for the 2024/2025 year include:
Class 1 (Employee's NICs): Payable on earnings between the Primary Threshold (£242 weekly) and Upper Earnings Limit (£967 weekly) at a rate of 8%, with earnings above the Upper Earnings Limit taxed at 2%.
Other Allowances and Rates
Savings and Dividend Allowances: Basic rate taxpayers have a Personal Savings Allowance of £1,000 and a Dividend Allowance of £500. Higher rate taxpayers receive a £500 Personal Savings Allowance.
Dividend Tax Bands:
Basic Rate: Income between £12,571 and £50,270 is taxed at 8.75%.
Higher Rate: Income between £50,271 and £125,140 is taxed at 33.75%.
Additional Rate: Income over £125,140 is taxed at 39.35%.
Capital Gains Tax (CGT): The annual exempt amount for individuals is £3,000. Basic rate taxpayers pay 10% on gains (18% for residential property), while higher rate taxpayers pay 20% (24% for residential property).
Additional Information
Marriage Allowance: Allows lower-earning partners to transfer £1,260 of their Personal Allowance to their higher-earning spouse, reducing their tax bill.
Blind Person's Allowance: Provides an additional allowance of £3,070.