New tax year changes 2024/25

The 2024/25 new tax year starts on 6th April 2024 and ends 5th April 2025.

This article breaks down the ins and outs of the new tax year for individuals and businesses, including the key changes, so you can feel confident stepping into the new financial year.

Table of contents

• Thresholds and allowances

• Corporation tax

• National Living Wage

• Pensions

• Student loans

• Company cars

• Other personal allowances and tax reliefs

Please note everything in this article is for your information only. QuickBooks always recommends speaking to your accountant for any financial advice.

Thresholds and allowances: Tax brackets 2024/25

Personal allowance, sometimes referred to as ‘tax-free allowance’, is the amount you’re allowed to earn in a given tax year before you start paying income tax.

Personal Allowance for 2024/25 tax year remains at £12,570. This is expected to be frozen until 2028.

The Higher Rate of Income tax threshold for 2024/25 remains at £50,270. This is also expected to be frozen until 2028.

The Income Tax additional rate threshold for 2024/25 remains at £125,140. This is the threshold at which you will not have any Personal Allowance, because £1 of the Personal Allowance is withdrawn for every £2 of income above £100,000.

The UK Income Tax rate 2024/25 thresholds might impact how you want to be paid if you run a Director Only business. Read our article on Payroll for Director Only businesses and chat to your accountant for advice. You can also skip to information on Dividend Allowance and tax rates for 2024/25.

UK Income Tax Rates and Bands (excluding Scotland)

This table shows the bands and tax rates for 2024/25, compared to the 2023/24 tax year. It assumes you have a standard Personal Allowance of £12,570.

How much can I earn before I pay 40% tax UK?

Please be aware that there are different tax rates for Scottish residents.

Please refer to the gov.uk income tax rates information.

Scottish Income Tax Rates and Bands

Residents of Scotland have different tax rates and bands to the rest of the UK. 

Scottish Personal Allowance for 2024/25 tax year remains at £12,570.

The Scottish Top Rate of Income Tax threshold for 2024/25 remains at £125,140.

This table shows the bands and tax rates for Scotland for 2024/25, compared to the 2023/24 tax year. It assumes you have a standard Personal Allowance of £12,570 - if you earn more than £100,000, your Personal Allowance is reduced by £1 for every £2 earned over £100,000.

Is Scottish income tax higher than England?

There are more tax bands in the Scottish income tax system than the rest of the UK. For this reason, income tax liabilities for Scotland are slightly lower for people on less than £27,000 per year, but greater for those on higher incomes.

National Insurance thresholds & NICs

The UK National Insurance threshold is £12,570 for a year for employees and self-employed workers.

From April 6, 2023, to January 5, 2024, employees' Class 1 National Insurance contributions (NICs) rate stood at 12% for all earnings falling between the primary threshold and the upper earnings limit. As of January 6, 2024, the primary rate is reduced to 8%. Earnings surpassing the upper earnings limit are subject to a 2% charge.

• Starting April 6, 2024, self-employed earners above £12,570 won't owe Class 2 NICs, while still retaining their access to State Pension benefits.

• Self-employed earners between £6,725 and £12,570 will access benefits via National Insurance credits without NIC payments.

• Those earning under £6,725 and voluntary Class 2 NIC payers for benefit access can carry on as before.

• From April 6, 2024, the government will reduce the main rate of Class 4 self-employed NICs from 9% to 6%, benefiting approximately two million people.

Corporation tax rates 2024/25

Every limited company must file and pay corporation tax (or report that have nothing to pay if applicable).

In the new tax year (2024/25), the main UK corporation tax rate remains at 25%.

This affects companies with profits of £250,000 or more – applying to all profits. 

Companies with profits of £50,000 or less use the Small Profits Rate of 19%.

If the company has profits between £50,000 and £250,000, there is a tapered rate.

If you’re a small business, QuickBooks accounting software is here to make keeping track of your finances simple and easy to understand.

Merging R&D and SME schemes

The government has revealed plans to merge the Research and Development Expenditure Credit (RDEC) and SME schemes. Expenditure accrued in accounting periods starting on or after April 1, 2024, will be claimed under the unified scheme.

National Living Wage 2024

National Living Wage and National Minimum Wage are not technically part of the new tax year changes, but it might impact how you pay your employees over this new tax year - and therefore have an impact on your taxes and payroll accounting.

The National Living Wage will increase to £11.44 for those aged 21+ from 1st April 2024. This differs from the year before, when it was 23 and over.

There are also changes to the National Minimum Wage for those aged 20 and under, and apprentices:

* Apprentices aged <19 or aged 19+ in their first year of apprenticeship. Once an apprentice is over 19 and has completed their first year of their apprenticeship, they are entitled to the minimum wage for their age group.

Pensions from April 2024/25

Workplace pensions

The total amount of employer and employee contributions into your employee’s auto-enrolment workplace pension remains at a minimum of 8% of the employee’s qualifying earnings. The employer must contribute at least 3%.

The new tax year (2024/25) will see no changes to the minimum amount you need to pay into your employee’s auto-enrolment workplace pension.

State pensions

There are some changes to state pensions from April 2024. However, this doesn’t affect what pension you pay to your employees. If you are an employee, this doesn’t affect your pension contributions.

State pension is claimed from the government when an individual reaches state pension age. 

Find out more about state pensions from Citizen’s Advice

Personal pensions

In the 2024/25 tax year, your annual allowance - the tax-free amount you can pay into a personal pension - is £60,000 (or an amount equal to your annual salary if this is lower).

The Chancellor has removed the lifetime allowance on pensions from 6th April 2023, meaning the amount an individual can accumulate in their pension pot before paying additional tax is no longer applicable. 

Personal pensions are arranged and managed by an individual, so don’t affect your payroll as an employer. Therefore, it’s not a feature in QuickBooks’ payroll software.

Student loans in the new tax year

Student loan payments may affect your payroll in the new tax year.

Ensure that you have a record of what type of student loan any employees on your payroll have, so you can make the correct deductions in line with the new thresholds (below). 

If you’re a director with a student loan, and you’re being paid salary and dividends from your company, bear in mind that the threshold for repayment is based on your total income.

QuickBooks payroll software can make calculating student loan repayments easy for you as an employer (or if you run a director only company).

Changes to student loan thresholds 2024/25

There are no rate changes, but the repayment threshold for some Plans has been changed:

For the 2024/25 tax year, the repayment threshold for pre-2012 (Plan 1) loans is £24,990. This has increased from £22,015.

The threshold for post-2012 (Plan 2) loans is £27,295. This has not changed.

Post-graduate repayment threshold for 2024/25 is £21,000, but may change.

For the 2024/25 tax year, the repayment threshold for Plan 4 student loans (for Scottish citizens) is £31,395. This has increased from £27,660.

A new Plan Type 5 student loan was introduced in August 2023, where graduates will start paying back what they owe when they earn £25,000 per year.

Company cars for employees

The simplest way to calculate the taxable value of company cars and fuel is by using commercial payroll software. The taxable value varies according to the car’s fuel type, any ‘downtime’ during the tax year, and CO2 emissions - it is not the same as the value of the car.

*Please note, this feature is only available in our advanced payroll software.

If you have a company car as a benefit from your job, which you can use privately (outside of work), you will have to pay Benefit in Kind (BiK) tax. This is usually calculated during payroll.

If you have a company car as a benefit from your job, which you can use privately (outside of work), you will have to pay Benefit in Kind (BiK) tax. This is usually calculated during payroll.

Benefit in Kind tax on company cars in 2024/25

Benefit in Kind (BiK) rates have been frozen since 2022/23 tax year. The 2024/25 BiK rates are the same as last year. They are due to stay at this rate until 2025.

Percentage BiK rates are the percentage of the vehicle’s P11D Value (its list price).

BiK rates table

This table uses WLTP figures to show BiK rates from conventional fuel (Electric, Petrol, RDE2 Diesel) for cars registered after April 2020, according to the vehicle’s emissions.

* Referring to the range of an electric vehicle

The tax your employee pays on their company car is then calculated: P11D value x BiK rate x employee’s tax band.

Company car fuel benefit

If you provide your employees with fuel for personal use, as well as the car itself, they will have to pay a car fuel benefit.

This is calculated based on the car’s BiK percentage multiplied with the current tax year’s multiplier.

The 2024/25 tax year multiplier for car fuel benefit is £27,800. This has not changed.

So if your employees company car Benefit in Kind (BiK) rate is 23% (as its emissions are 90-94 g/km) and they fall in the 20% tax rate bracket. They will have to pay approximately £1164 in car fuel benefit tax (0.23 x 25,300 x 0.2).

Sound complicated? Use QuickBooks advanced payroll software to automate calculations into your employees payroll.

BiK on company vans & fuel

The BiK paid on company vans in the 2024/25 tax year is £3,960. This has stayed the same and can be reduced if:

• your employee cannot use the van for 30 days (or more) in a row

• your employee pays you to privately use the van

• other employees use the van - divide £3,960 by the number of employees

BiK on van fuel (fuel used for private journeys) in the 2024/25 tax year is £757. This has stayed the same.

This can be reduced if:

• the employee cannot use the van for 30 days (or more) in a row

• your employee pays you back for all their private fuel

• you stopped providing fuel during the tax year

Other personal allowances and tax reliefs

Personal Savings Allowance

Personal Savings Allowance is the amount your savings account can earn in tax-free interest each tax year.

In the new tax year, 2024/25, basic rate taxpayers can earn up to £1000 tax-free interest. This has not changed.

Remember if you are a Scottish resident, tax bands are different.

ISAs

ISAs and other tax-free savings accounts do not count towards your Personal Savings Allowance (above).

This has remained the same since the 2017/18 tax year.

But, starting April 2024, adjustments will enable multiple subscriptions to ISAs of identical types annually and facilitate partial transfers of ISA funds within the year among providers.

There are 4 types of ISA - you can put money into one of each type each tax year but the total must not exceed the maximum £20,000:

• cash ISAs

• stocks and shares ISAs

• innovative finance ISAs

• Lifetime ISAs

Dividend tax allowance

You do not pay tax on any dividend income that falls within your Personal Allowance. You then also get a tax-free dividend tax allowance - you only pay tax on dividends exceeding this amount.

The allowance has decreased from £2000 in the 22/23 tax year and from £1000 in the 23/24 tax year.

2024/25 Dividends tax rate

Your Dividend tax rate in the new tax year (2024/25) is dependent upon your tax band. The bands have changed from last year, and are now the below:

UK capital gains tax rates

The UK capital gains tax allowance is £3,000 for the 2024/25 tax year.

This is for individuals and personal representatives. It is different for trustees.

In the previous tax year, it was £6,000, so the allowance has been halved.

The Capital Gains Tax (CGT) rates have not changed for 2024/25:

* This rate depends on your total taxable gains, your taxable allowance and how much taxable income you have (minus your Personal Allowance) as follows: total taxable gains - tax-free allowance + taxable income. If the total is still within the basic income band this rate applies. If the total is more, then your rate will match the higher/additional rates.

Find out more: https://www.gov.uk/capital-gains-tax/rates

Business Asset Disposal Relief (Entrepreneurs’ relief)

The previous ‘Entrepreneurs’ relief’ is now known as Business Asset Disposal Relief (since April 2020).

Qualifying individuals pay less Capital Gains Tax when selling all or part of their business.

Business Asset Disposal Relief in 2024/25 means you pay 10% Capital Gains Tax (CGT) on qualifying assets - rather than the standard rate (above).

For more information on if you qualify for Business Asset Disposal Relief visit: https://www.gov.uk/business-asset-disposal-relief

Inheritance tax

In the new tax year (2024/25), estates worth £325,000 or less are tax-free allowance UK.

The tax rate on estates worth more than £325,000 is 40%. This has not changed since the previous tax year and is frozen until 2026.

Preparation and filing of inheritance tax is not included in QuickBooks products.

Need support?

QuickBooks’ accounting software is designed to help sole traders and limited companies stay in control of their finances. We help to automate payroll, keep track of expenses and ensure you can be Making Tax Digital compliant with your tax returns. 

All information in this article is correct as of 23/02/24 - please always refer to government guidance and the advice of your accountant before making any financial decisions.

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