close
close
what is the tax allowance for 2024 to 2025?

what is the tax allowance for 2024 to 2025?

2 min read 02-12-2024
what is the tax allowance for 2024 to 2025?

The UK tax system can be complex, but understanding your tax allowances is crucial for ensuring you pay the correct amount of tax. This article outlines the key tax allowances for the 2024-2025 tax year, which runs from 6 April 2024 to 5 April 2025. It's important to note that these figures are subject to change, so always check the official government website for the most up-to-date information.

Personal Allowance

The personal allowance is the amount you can earn each year before you start paying income tax. For the 2024-2025 tax year, the personal allowance is currently projected to remain at £12,570. This means you can earn up to this amount without paying income tax. However, this allowance is gradually reduced if your income exceeds £100,000.

Income Tax Rates for 2024-2025

Once you exceed your personal allowance, you'll pay income tax at different rates depending on your income bracket:

  • 0%: Up to your personal allowance (£12,570)
  • 20%: Income between £12,571 and £50,270
  • 40%: Income between £50,271 and £125,140
  • 45%: Income above £125,140

Other Important Tax Allowances

Beyond the personal allowance, several other tax allowances can reduce your overall tax bill. These include:

Marriage Allowance

If one partner is a non-taxpayer and the other is a basic-rate taxpayer, you can transfer 10% of the non-taxpayer's personal allowance to the higher-earning partner. This can reduce the tax bill for the higher earner. The exact amount transferable will depend on individual circumstances.

Capital Gains Tax Allowance

This allowance covers profits from selling assets like shares or property. For 2024-2025, the annual exempt amount for Capital Gains Tax is projected to remain at £12,300. Profits exceeding this amount are subject to capital gains tax at either 10% or 20%, depending on your income tax bracket.

Dividend Allowance

This allowance applies to dividends you receive from investments. The dividend allowance for 2024-2025 is projected to remain at £2,000. Dividends exceeding this amount are subject to dividend tax.

Tax Codes

Your tax code is a number on your payslip that tells your employer how much income tax to deduct. Understanding your tax code is essential to ensure you aren't overpaying or underpaying tax. Common tax codes include:

  • 1257L: This is a common code reflecting the standard personal allowance.
  • Other Codes: Different codes can reflect various allowances, deductions, or other circumstances. If you're unsure about your tax code, contact HMRC.

Planning for the Tax Year

Proactive tax planning is vital. Considering your income, allowances, and potential tax-efficient investments can help you minimize your tax liability. Seeking advice from a qualified financial advisor can prove particularly beneficial for those with complex financial situations.

Disclaimer:

This information is for guidance only and does not constitute financial advice. Always refer to the official HMRC website for the most accurate and up-to-date information regarding tax allowances and rates for the 2024-2025 tax year. Seek professional financial advice if you need personalized guidance on your tax situation.

Related Posts


Latest Posts


Popular Posts