Let’s talk about everyone’s favorite topic – TAXES!
Of course, this is only HMRC’s favorite topic, as they take some of your hard-earned cash. But the question on many people’s minds is: what changes are we expecting to see in the 2024-25 tax year and how will this affect our take-home salary?
Firstly, for those not familiar with the UK tax year end, it is a very strange 5th April! Hence, the tax year in the UK is split over two years.
Each Autumn, the UK government unveil their Autumn Statement where they also announce plans for the new fiscal year, including the proposed tax rates from HMRC.
So, what percentage of your hard-earned pennies are you going to have to fork over to the taxman this year?
Well, this very much depends on how much you make each year.
From 6 April 2024, the basic rate of income tax stands at 20% for earnings between £12,571 and £50,270. Anything earned up to £12,570 is tax-free (excluding any tax code adjustments). If you’re lucky enough to be raking in more than £50,270, you’ll be looking at a higher rate of 40% on earnings between £50,271 and £150,000. If you’re a high earner, brace yourself for the additional rate of 45% on anything over £150,000.
Now we can’t forget National Insurance contributions (NICs) – that’s social security for the rest of the EU. These mandatory contributions go towards the UK’s public services and benefits system, including free healthcare through the NHS. From 6 January 2024, employees have seen a reduction in NICs, which is now 10% of your earnings between £12,571 and £50,270, and 2% on anything above that.
Employers Costs for the UK are simply National Insurance contributions and the auto- enrolment pension. For the 2024-25 tax year, the rate for NI Contributions is 13.8% on everything over £9,100. There are different thresholds if your employee is under the age of 21 or 25 if employed under certain apprenticeship scheme, but we will leave that for another day.
Now, I know what you’re thinking – “that’s a lot of numbers and percentages, mate!” And you’re not wrong. It can all feel a bit overwhelming; especially if you’re not a fan of math. (Who is, really? Well, me – but I appreciate it’s not everyone’s cup of Earl Grey).So, I have put a handy little table below with the breakdown:
- Earnings up to 37,700 – 20% tax rate
- Earnings from £37,701 to £125,140 – 40% tax rate
- Earnings over £125,140. – 45% tax rate
I hope that is helpful for everyone reading this quick little rundown of the tax and National Insurance rates for 2024-25. Hopefully, I’ve managed to make the whole thing a little easier to understand.
Still got questions or queries? Feel free to reach out to me directly on LinkedIn.
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