The start of the new tax year is an important time for every business, regardless of its size, legal structure, or activities. Aside from the usual year-end accounting requirements and filing obligations, it’s the time when several tax changes typically take effect. Most of these occur on 6 April – the first day of the tax year.
With this in mind, our handy 2024-25 tax guide provides an overview of the various rates, thresholds, allowances, and notable changes you need to know about as a UK business owner.
Income Tax and National Insurance contributions
Whether you’re a sole trader, a self-employed partner in a business partnership, or pay yourself through a limited company, you’ll be affected by Income Tax and National Insurance in one way or another.
You have no choice but to pay these taxes on your full profits if you’re self-employed. However, if you’re a director and shareholder of a company, you do have some degree of control over how much Income Tax and National Insurance you pay on your personal earnings.
Below, we set out the different rates of Income Tax and National Insurance that may apply to the personal income you receive through your business in 2024-25.
Personal Allowance
The annual Personal Allowance is £12,570 per year (£242 per week or £1,048 per month). This is the amount of income you can receive tax-free in 2024-25. It’s the same as the previous year and applies to taxpayers in all parts of the UK.
If you earn more than £100,000 in the year, you’ll see your Personal Allowance reduced by £1 for every £2 you earn above that amount. Therefore, if your total income for the year is more than £125,140, your Personal Allowance will be £0.
Income Tax in England, Wales, and Northern Ireland
In the 2024-25 tax year, taxpayers in England, Wales, and Northern Ireland will pay the same rates of Income Tax as in the previous year. The taxable income thresholds for each band also remain unchanged, as set out in the table below.
| Income Tax band | Taxable income threshold | Income Tax rate |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
Income Tax in Scotland
Taxpayers in Scotland pay Scottish Income Tax. There are several changes to the rates and thresholds for the 2024-25 tax year. Most notable are:
- an increase of 6.7% to the starter rate and basic rate thresholds
- a new 45% ‘advanced rate’ tax band
- a 1 percentage point increase to the top rate
| Scottish Income Tax band | Taxable income threshold | Scottish Income Tax rate |
| Starter rate | £12,571 to £14,876 | 19% |
| Basic rate | £14,877 to £26,561 | 20% |
| Intermediate rate | £26,562 to £43,662 | 21% |
| Higher rate | £43,663 to £75,000 | 42% |
| Advanced rate | £75,001 to £125,140 | 45% |
| Top rate | Over £125,140 | 48% |
National Insurance contributions (NIC)
Employees, directors, and the self-employed will all pay lower rates of National Insurance contributions (NIC) in this new tax year. Following on from the changes announced in the Autumn Statement 2023, the government introduced further cuts to both Class 1 and Class 4 rates in the Spring Budget 2024.
Additionally, the government abolished Class 2 National Insurance contributions for self-employed people with profits above £12,570. Crucially, this will have no impact on access to contributory benefits, including the State Pension.
However, voluntary National Insurance contributions are still possible. If your profits are below £6,725, you can make voluntary Class 2 NICs to protect your entitlement to benefits. Similarly, if your director’s salary is less than £123 a week, or you want to fill gaps in your National Insurance record, you can pay voluntary Class 3 contributions.
The following National Insurance rates and thresholds apply from 6 April 2024:
| National Insurance class | Contribution rate | Contribution threshold |
| Class 1 employee (primary) NIC | 8%
2% |
£12,570 per year
£1,048 per month £242 per week
£50,270 per year £4,189 per month £967 per week |
| Class 1 employer (secondary) NIC | 13.8% | £9,100 per year
£758 per month £175 per week |
| Class 4 NIC | 6% | £12,570 per year
£1,048 per month £242 per week |
| Class 2 NIC | £3.45 per week | Voluntary |
| Class 3 NIC | £17.45 per week | Voluntary |
At the Autumn Budget 2024, the government announced that employers’ NIC will increase from 13.8% to 15%, and the secondary threshold will be reduced from £9,100 to £5,000 per annum. These changes will take effect from 6 April 2025 until 5 April 2028.
Tax on dividend income
There are no changes to the tax rates payable on dividend income. Notably, however, the tax-free dividend allowance in the new tax year is now only £500. This is a 50% reduction on the previous tax year’s allowance.
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Since dividend tax is based on Income Tax bands and thresholds, you will only pay tax on dividends if your annual income from all sources exceeds £13,070. This is the combined total of the full Personal Allowance (£12,570) and dividend allowance (£500).
Above £13,070, you will pay the following rates of tax on dividend income received in the 2024-25 tax year:
| Income Tax band | Dividend tax rate | Dividend income threshold |
| Basic rate | 8.75% | £13,070 to £50,270 |
| Higher rate | 33.75% | £50,271 to £125,140 |
| Additional rate | 38.35% | Over £125,140 |
If you pay Scottish Income Tax, you’ll pay tax on dividends based on the Income Tax bands and thresholds that apply to the rest of the UK, as in the table above.
Pension tax relief
The private pension annual allowance for 2024-25 remains unchanged at £60,000. However, the lifetime allowance (LTA) for private pension savings will be abolished from 6 April 2024. The legislative changes are set out in the Finance Act 2024.
The LTA is being replaced by three new allowances. Consequently, there are still limits on the amount of tax-free pension savings that people can receive from their registered schemes. These limits are as follows:
- The lump sum allowance (LSA) – £268,275, which is equivalent to 25% of the LTA
- The lump sum and death benefit allowance (LSDBA) – £1,073,100, which is equivalent to the LTA
- The overseas transfer allowance (OTA) – £1,073,100
Benefit crystallisation events (BCEs) have also been replaced with relevant benefit crystallisation events (RBCEs). These relate only to the tax-free element of the benefit received.
Corporation Tax
There are no changes to Corporation Tax rates and thresholds for 2024-25. If you own a limited company, you will continue to pay the following rates of Corporation Tax on all business profits:
- 19% ‘small profits’ rate – if your company’s annual profits are £50,000 or less
- 25% ‘main rate’ – applied to all profits if your company’s annual profits exceed £250,000
For companies with profits between £50,000 and £250,000, Corporation Tax is charged at 25%. However, you will be entitled to Marginal Relief. This provides tapered relief between the small profits rate and the main rate.
You will not be eligible to claim Marginal Relief if profits exceed £250,000 or you are a close investment holding company or non-UK resident company.
Value Added Tax (VAT)
VAT rates remain unchanged on the previous tax year. However, the government announced changes to the VAT registration and deregistration thresholds in the Spring Budget 2024.
From 1 April 2024, the VAT registration threshold is £90,000, and the VAT deregistration threshold is £88,000. These increases represent the first changes to VAT thresholds since 2017.
Capital Gains Tax (CGT)
The Capital Gains Tax annual exempt amount (tax-free allowance) will be permanently fixed at £3,000 from April 2024. This is a 50% reduction on the allowance available in the previous tax year.
The higher rate of Capital Gains Tax for residential property gains will be reduced to 24% from 6 April 2024. However, the lower rate of CGT for residential property gains remains at 18% for this tax year.
The reduction in the main rate from 28% to 24% will be welcome news if you’re a property investor, landlord, or second-home owner considering selling one or more of your residential properties in the new tax year.
Sole traders and partnerships will continue to pay 10% CGT in 2024-25 if their gains on the disposal of business assets qualify for Business Asset Disposal Relief (formerly known as Entrepreneurs’ Relief). However, this rate will increase to 14% for disposals made on or after 6 April 2025, then 18% for disposals made on or after 6 April 2026.
For individuals disposing of other chargeable assets (i.e. not residential property), the lower rate of 10% and the higher rate of 20% will apply to gains until 29 October 2024. However, for disposals made from 30 October 2024 onwards, these rates will increase to 18% and 24%, respectively.
Stamp duty on investment property purchases
If you’re planning to purchase a buy-to-let or investment property in the 2024-25 tax year, you may have to pay tax on the purchase price. The type of tax payable depends on where the property is situated
England or Northern Ireland
Stamp Duty Land Tax (SDLT) applies to property purchases in England and Northern Ireland. If you’re a homeowner and you buy an additional residential property for more than £40,000, the purchase will attract the standard rates of SDLT plus an extra 3% (for transactions until 30 October 2024) or 5% (for transactions on or after 31 October 2024). The higher rates payable are as follows:
| Property purchase price | Rate on additional property |
| Up to £250,000 | 3% (5% from 31 Oct. 2024) |
| £250,001 to £925,000 | 8% (10% from 31 Oct. 2024) |
| £925,001 to £1,500,000 | 13% (15% from 31 Oct. 2024) |
| Over £1,500,000 | 15% (17% from 31 Oct 2024) |
When buying through a company, these higher rates apply to all residential property purchases (including the first). If the company pays more than £500,000 for the property, you’ll pay a flat rate of 15% SDLT (for transactions until 30 October 2024) or 17% (for transactions on or after 31 October 2024).
If you buy non-residential or mixed-use land or property for more than £150,000, you’ll pay an SDLT rate of:
- 2% on the portion from £150,000 to £250,000
- 5% on the remaining amount above £250,000.
From 1 June 2024, the government is abolishing Multiple Dwellings Relief. However, if you exchanged contracts on or before 6 March 2024, the relief will apply even if the completion of the property purchase takes place on or after 1 June.
Scotland
When you purchase property in Scotland, you pay Land & Buildings Transactions Tax (LBTT). If you’re a homeowner and you pay more than £40,000 for an additional residential property, the purchase will be subject to the standard residential rates of LBTT plus 6%. This higher rate is known as the Additional Dwelling Supplement (ADS).
If you buy a residential property as a non-individual, the ADS will also apply to the first purchase. A ‘non-individual’ includes limited companies, as well as individuals acting as sole traders or within a partnership where the main activity of the business is dealing or investing in property.
The Additional Dwelling Supplement rates in the 2024-25 tax year are as follows:
| Property purchase price | Additional Dwelling Supplement |
| Up to £145,000 | 6% |
| £145,001 to £250,000 | 8% |
| £250,001 to £325,000 | 11% |
| £325,001 to £750,000 | 16% |
| Over £750,000 | 18% |
If you purchase non-residential or mixed-use land or property in Scotland for more than £150,000, you pay an LBTT rate of 1% on the portion between £150,000 and £250,000, then 5% on anything above £250,000.
Wales
When buying property in Wales, you pay Land Transaction Tax (LTT). If you own at least one other residential property or you’re buying through a limited company, the purchase will attract the following higher residential rates of LTT:
| Property purchase price | Rate on additional property |
| Up to £180,000 | 4% |
| £180,001 to £225,000 | 7.5% |
| £225,001 to £400,000 | 9% |
| £400,001 to £750,000 | 11.5% |
| £750,001 to £1,500,000 | 14% |
| Over £1,500,000 | 16% |
If you purchase non-residential property in Wales for more than £225,000, you pay an LBT rate of 1% on the portion between £225,000 and £250,000, 5% on the portion between £250,001 and £1,000,000, then 6% on anything above £1,000,000.
National Living Wage and Minimum Wage
If you are an employer and pay any of your staff the National Living Wage or National Minimum Wage, you must pay them at least the following rates from 1st April 2024:
| Worker’s age | Minimum hourly pay rate |
| Age 21 and over | £11.44 (National Living Wage) |
| Age 18-20 | £8.60 |
| Age 16-17 | £6.40 |
When employing apprentices, you’re required to pay them at least the apprentice rate of £6.40 per hour if they are either:
- under the age of 19
- aged 19 or over and serving the first year of their apprenticeship
If any of your apprentices are aged 19 or over and have completed the first year of their apprenticeship, you must pay them at least the minimum wage for their age.
Employment Allowance
The Employment Allowance for the 2024-25 tax year is £5,000. If you are an eligible employer, you can utilise this allowance to reduce your Class 1 employer’s National Insurance bill. This allowance will increase to £10,500 from 6 April 2025.
Statutory pay rates
From 6 April 2024, the rate of Statutory Sick Pay (SSP) for eligible employees is £116.75 per week. The same rate applies to all employees. However, the ‘daily rate’ that you pay an employee for each day they’re off work depends on the number of ‘qualifying days’ they work each week.
You can determine how much SSP you need to pay your employees using GOV.UK’s Statutory Sick Pay calculator.
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From 7 April 2024, employees are entitled to Statutory Maternity Pay and Statutory Adoption Pay at 90% of their average weekly earnings. After the first 6 weeks, they receive £184.03 or 90% of their average weekly earnings (whichever is lower).
The same weekly rates apply to Statutory Paternity Pay, Statutory Shared Parental Pay, and Statutory Parental Bereavement Pay – either £184.03 or 90% of their average weekly earnings (whichever is lower).
You can use GOV.UK’s maternity, adoption and paternity calculator for employers to work out an employee’s parental pay, qualifying week, average weekly earnings, and leave period.
Thanks for reading
We hope you’ve found our 2024-25 tax guide helpful. Perhaps it can serve as a handy reference throughout the year. As always, we recommend speaking to your accountant for expert tax and financial planning advice.
Please pop a comment below if you have any questions. For more small business guidance and insights, explore the 1st Formations Blog.
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