This guide contains the Income Tax and National Insurance rates and Personal Allowance for the tax year 6 April 2024 to 5 April 2025.
Personal Allowance
For the majority of employees, the tax-free Personal Allowance for 2024/25 will be £12,570 which means the first £12,570 of earnings in the tax year will be free of Income Tax.
This will be reflected in your tax code. If your tax code for 2024/25 is 1257L then you will be entitled to this allowance when your salary is calculated. Your coding notice may be adjusted by any allowances you are entitled to which reduce your tax bill or things that you have to pay tax on through your salary or pension. You can find more information on tax codes here.
Income Tax rates
| Income per year | Rate (salaries) | Rate (dividends) – above dividend allowance of £500 | |
|---|---|---|---|
| Basic Rate | £12,571 – £50,270 | 20% | 8.75% |
| Higher Rate | £50,271 – £125,140 | 40% | 33.75% |
| Additional Rate | Above £125,140 | 45% | 39.35% |
Income Tax example
If an employee earns a salary of £56,000 they will pay tax as follows:
- Personal Allowance – the first £12,570 of their salary will be free of tax
- Basic Rate – they will pay 20% tax on £37,700 of their salary, which is £7,540
- Higher Rate – they will pay 40% tax on the remaining £5,730 of their salary, which is £2,292
- In total, this employee will pay £9,832 in Income Tax
Please be aware that Income Tax rates are different for Scottish taxpayers. HMRC will determine whether or not you are a Scottish taxpayer based on where your main place of residence is. If you are a Scottish taxpayer, your 2024/25 PAYE tax code will have the letter ‘S’ at the front.
You can find more information on the Scottish PAYE tax codes and rates here.
National Insurance rates
There are two different National Insurance contributions that must be paid: one is paid by the employee and is deducted from their gross salary, in a similar way to income tax; the second payment is made by the employer and is an additional outgoing for the employer, in addition to gross salaries.
| Paid by Employees | Paid by Employers | ||
|---|---|---|---|
| Income per year | Rate | Income per year | Rate |
| Below £12,570 | 0% | Below £9,100 | 0% |
| £12,571 – £50,270 | 8% | £9,101 – £50,270 | 13.8% |
| Above £50,271 | 2% | Above £50,271 | 13.8% |
National Insurance and state benefits
Employees must earn over £6,396 per year in order to retain access to certain state benefits, such as state pensions.