UK Budget 2024 – Blog 2 – Income Tax

Please note that tax years run to 5 April each year and that 2024/2025 means the tax year to 5 April 2025.

Your personal allowance

Your tax-free personal allowance will remain at £12,570 in 2024/2025. The personal allowance is partially withdrawn if your income is over £100,000 and then fully withdrawn if your income is over £125,140.

Income tax rates and allowances

For 2024/2025, income tax rates and thresholds remain frozen at their 2023/2024 levels.

After your tax-free personal allowance has been deducted, ‘Other income’ for non Scottish taxpayers is taxed in bands in 2024/2025 as follows (see below for the different rates and bands that apply to Scottish taxpayer’s ‘Other income’).

		‘Other income’	Savings income	Dividend income
Basic rate	£1 – £37,700	20%	20%	8.75%
Higher rate	£37,701 – £125,140	40%	40%	33.75%
Additional rate	Over £125,140	45%	45%	39.35%

 

‘Other income’ means income other than from savings or dividends. This includes salaries, bonuses, profits made by a sole trader or partner in a business, rental income, pension income and anything else that is not exempt.

So what?

Without inflationary increases to the income tax bands, the Chancellor is effectively imposing an income tax increase; as wages and earnings rise and a larger proportion falls into higher tax bands. This is known as ‘fiscal drag’.

Scottish taxpayers

If your main residence is in Scotland or you are otherwise classed as a ‘Scottish taxpayer’, the application of income tax rates and bands applies differently where ‘other income’ is concerned. After the ‘personal allowance’ has been deducted, your ‘other income’ is taxed in bands as follows:

	2024/2025		2023/2024
Starter rate	£1 – £2,306	19%	£1 – £2,162	19%
Basic rate	£2,307 – £13,991	20%	£2,163 – £13,118	20%
Intermediate rate	£13,992 – £31,092	21%	£13,119 – £31,092	21%
Higher rate	£31,093 – £62,430	42%	£31,093 – £125,140	42%
Advanced rate	£62,431 – £125,140	45%
Top rate	Over £125,140	48%	Over £125,140	47%

 

The Scottish Budget was held on 19 December 2023 and made changes including the introduction of the new ‘advanced rate’ of income tax  of 45% for 2024/25.

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.