Personal Tax Allowance for 2024/25 Explained
24th May, 2024
Understanding the Personal Tax Allowance 2024 25 tax year is important and useful to know. With this understanding you can work out exactly what you will be paid, bearing in mind the income tax bracket that applies to you.
Tax can be confusing if you are unsure of the rules that apply to you. To have the Personal Tax Allowance for 2024/25 explained, continue reading this article.
What Is a Personal Tax Allowance?
A Personal Tax Allowance refers to the amount of money that you can earn per year before you start to pay Income Tax on your earnings.
Everyone is entitled to their Personal Tax Allowance, including students. The amount of this Personal Tax Allowance is set each tax year. The current tax year is from 6th April 2024 to the 5th April 2025.
What Is the Personal Tax Allowance for the 2024/25 Tax Year UK?
For the current 2024/25 tax year, the Personal Tax Allowance stands at £12,570. If you earn under this amount then you will not need to pay an Income Tax.
There are some exceptions that allow a larger Personal Allowance, for example in cases where you claim Marriage Allowance or Blind Person’s Allowance.
In other cases, it can be smaller due to any outstanding tax that you owe from a previous tax year, or if your annual income is over the £100,000 threshold then it will also be smaller.
What Is My Personal Tax Allowance If I Earn Over £100,000?
If you are a higher earner and earn over the £100,000 mark then your Personal Tax Allowance figure will go from the standard £12,570 to a reduced figure of £1 for every £2 that you earn over £100,000.
If you earn over £125,000 then you will pay your Income Tax on everything that you earn and you no longer have a personal tax-free allowance.
What Is Income Tax?
Income tax is the tax that is collected on behalf of the government from an individual’s earnings or income. It is the tax that is collected after a person’s Personal Tax Allowance.
There are several income tax rates and for the tax year 2024/25 after the Personal Tax Allowance the income tax band rates are as follows:
- £12,571 – £50,270 = 20% (this is the basic rate)
- £50,271 – £125,140 = 40% (higher rate)
- £125,141 + = 45% (additional rate)
Income tax helps by funding public services, including the NHS as well as the education system, public projects, housing and paying back interest on money that the government has borrowed from elsewhere.
Is My Personal Allowance Different If I Am Self-Employed?
If you are self-employed your Personal Allowance is the same as someone who is not self-employed. You are entitled to the same tax-free Personal Allowance as someone who is employed by someone else. This is as stated previously, £12,570 for the tax year of 2024/25.
After the amount of £12,570 is earned by you as a self-employed person, you will begin to pay Income Tax after this.
If you have two jobs and you are self-employed for one of them, then things can get more complicated.
Personal Tax Allowance Rules for a Second Job
Whichever job the government sees as your main employment source, they will treat your Personal Allowance. You are only entitled to one Personal Allowance from one employer. This is usually the job you are getting paid the most from.
Let this not deter you from getting a second job or starting your own business. Many people choose to take on a second job for the extra money and as a stepping stone for launching their own self-employment business journey.
Just make sure you are aware of your rights when taking a second job and how you will pay tax and National Insurance on them.
Trading and Property Allowance
Looking for other ways to earn tax-free cash? Then if you are lucky enough to be involved in the property trade there is something for you called the trading or property allowance. You can earn up to £1000 for trading or property a year in tax-free money. This has been in effect since April 2017.
You can get £1000 tax-free money for both property and trading, without needing to declare it. Anything over this amount and you will have to declare your earnings and register with HMRC, filling in a Self-Assessment Tax Return.
You need to claim this allowance, you cannot deduct it from your business accounts or expenses.
A tip to take on board is if your expenses are more than £1000, then you are better off not claiming the allowance and deducting it from your expenses on your Self Assessment tax return.
Haggards Crowther Can Help
At Haggards Crowther we have a wealth of accounting knowledge including taxes. When you choose us as your dedicated accountants, you will receive a member of our team who is there to support you. They will be on hand to answer any of your tax queries and help you with business or personal tax services.
With a professional accountancy firm to support you, it can help take the stresses away that can come from handling tax and your personal finances – so talk to the experts today.
For more information about our tax services and the wide range of other services that we provide at Haggards Crowther, you visit our website to discover more about what we can offer you.
Contact us today to discuss your options with us further and to learn what we can do for you. Whether that be business, individual or start-up accounting needs and advice, we can be there for you. All of our contact details can be found on our website.
Andrew founded Haggards Crowther with his brother in 2004 and took over as Managing Partner in May 2023. He has always been closely involved in client work, in particular providing high level strategic tax and structuring advice, business advice and supporting the technical and compliance teams.
As Managing Partner, he has focussed on growing the business and ensuring the firm upholds its core values of Quality of Service, Innovation, Collaboration and Integrity. These remain central to all that we do both internally and in serving our clients.
A Fulham resident for over 30 years Andrew is closely connected with the local business community and supporting many of them on their journeys. He is especially linked with fellow start-up entrepreneurs advising them on their growth strategies and optimal structures.
A passionate Fulham FC supporter, along with his two sons, Andrew rarely misses a game. He plays and coaches volleyball, something he has done since university in Edinburgh, and which offsets another of his passions: exploring the vast and diverse range of food that London’s restaurants have to offer.
He has a keen interest in many conservation projects especially in protecting endangered species of birds and actively supports the Mabula Project in South Africa. This charity supports the Southern Ground Hornbill, a charismatic species of cultural and ecological importance threatened by loss of habitat through the encroaching development of the savannah.
