Income Tax Rates and Allowances

Individuals are liable to pay income tax at various rates on their taxable income. Income tax rates and allowances are usually revised each tax year and often announced in a budget or autumn statement quite some time before they come into effect.

Tax Rates & Allowances

Income Tax:

Personal Allowance

2024/25 2023/24
£12,570 £12,570

The basic personal allowance is gradually reduced to nil for individuals with adjusted net income in excess of £100,000.
Income tax is charged on taxable income after deduction of personal allowances. The income is taxed in a specified order with dividend income being treated as the top slice of taxable income.

Income Tax Rates

  Rate Rate for Dividends 2024/25 2023/24
Starting Rate for Savings* 0% n/a £0 – £5,000 £0 – £5,000
Basic Rate 20% 8.75% £0 – £37,700 £0 – £37,700
Higher Rate 40% 33.75% £37,701-£125,140 £37,701 – £125,140
Additional Rate 45% 39.35% Over £125,240 Over £125,140

*Eligibility varies depending on your other income (wages, pension, trading profits). You lose £1 of this 0% rate for each £1 earned above £12,570.

Special rates for savings and dividend income at 0% rate apply to:

  • the first £1,000 of savings income for basic rate taxpayers
  • the first £500 of savings income for higher rate taxpayers
  • nil for additional rate taxpayers
  • the first £500 of dividend income for all taxpayers (2023/24 £1,000)

Allowances are available for individuals of £1,000 each, one for trading income and one for property income.

We have shown the rates for the current and previous tax year. Click here for further information

The higher earner of a couple entitled to Child Benefit will have a tax charge if their “adjusted net income” exceeds £60,000 in a tax year. If “adjusted net income” exceeds £80,000, then the tax charge will be equivalent to all of the child benefit received.

Marriage Allowance

In the 2024/25 tax year the Marriage Allowance allows you to be able to transfer up to £1,260 (2023/24 £1,260) of your personal allowance to your husband, wife or civil partner – if they earn more than you. To benefit as a couple, the lower earner must have an income of £12,570 or less.

You can get Marriage Allowance for 2024/25 if all of the following apply:

  • you’re married or in a civil partnership
  • you don’t earn anything, or your income is under £12,570 (2023/24 £12,570)
  • your partner’s income is between £12,570 and £50,270 (2023/24 £12,570 – £50,270)

See Hot Topic “Marriage Allowance“.

You can apply through the following link – HMRC Marriage Allowance application