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Direct taxes are paid directly by the taxpayer to the government. For individuals, the main direct taxes in the UK are income tax and National Insurance contributions. Indirect taxes are collected by another party – such as a retailer or a producer – and then paid to the government. The main indirect taxes in the UK are VAT and excise duties, charged on alcohol, tobacco, and road fuel.

This briefing sets out direct tax rates and principal tax allowances for the 2024/25 tax year. It describes the conditions necessary for eligibility for these tax allowances and provides a summary of the general tax position in straightforward cases.

This briefing deals with tax allowances, but not with cash benefits provided under the social security system, child tax credit or working tax credit.

Income tax

Income tax on earned income is charged at three rates: the basic rate, the higher rate and the additional rate.

For 2024/25 these three rates are 20%, 40% and 45% respectively.

Tax is charged on ‘taxable income’ at the basic 20% rate up to the basic rate limit, set at £37,700. Taxable income excludes personal allowances, which are the amount of money someone can receive without having to pay tax on it.

The higher 40% rate is charged on taxable income between the basic rate limit and the additional rate threshold, set at £125,140.

The additional 45% rate is charged on taxable income over £125,140.

All three tax rates and thresholds are unchanged from 2023/24.

Personal allowance

The personal allowance for income tax is set at £12,570 for 2024/25. Like the basic rate limit, the personal allowance has been fixed in value since 2021/22.

Marriage allowance

Married couples and civil partners may be entitled to claim the marriage allowance. Individuals whose income is insufficient to make full use of their personal allowance can transfer this unused fraction to their spouse or civil partner, up to a set amount.

Individuals cannot make use of this provision if their spouse or partner pays more than the basic rate of tax.

For 2024/25 the maximum that can be transferred is £1,260.

National Insurance contributions

The main rate of National Insurance contributions (NICs) for employees is cut by two percentage points from 10% to 8% from 6 April 2024.

The main rate is charged on all earnings between the primary threshold and the upper earnings limit. This follows a previous rate cut from 12% to 10%, announced in the 2023 Autumn Statement, which took effect from 6 January 2024. Employee earnings above the upper earnings limit are charged at 2%. This rate is unchanged for 2024/25.

The rate of NICs for employers is set at 13.8% on earnings above the secondary threshold. This rate is unchanged for 2024/25.

The primary threshold for employees is £242 per week for 2024/25. The upper earnings limit is set at £967 per week for 2024/25, so that it remains aligned with the income tax higher rate threshold. The secondary threshold is set at £175 per week for 2024/25. All three thresholds are unchanged from 2023/24.

Further information

Details of tax rates and allowances as well as tax credits for the 2024/25 year are set out in Annex A to HM Revenue & Customs, Overview of Tax Legislation and Rates, March 2024 published alongside the Spring Budget 2024.

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