Autumn Budget 24 update
Chancellor Rachel Reeves delivered her Budget on Wednesday 30 October 2024. She pledged to ‘invest, invest, invest’ to drive growth and ‘restore economic stability’.
Billions in tax rises
Ms Reeves said the Budget will raise £40 billion in taxes.
- Employers’ National Insurance contributions (NICs) will be increased from next April
- Capital Gains Tax rates will also rise.
- Inherited pensions will fall within the Inheritance Tax net from April 2027 while reliefs will be reformed on the passing down of agricultural and business assets.
- The Chancellor also confirmed the introduction of VAT on private school fees and the abolishment of the tax regime for non-UK domiciled individuals.
Tax bands and rates
The basic rate of tax is 20%. For 2025/26 the band of income taxable at this rate is £37,700 so that the threshold at which the 40% rate applies is £50,270 for those who are entitled to the full personal allowance.
For 2025/26 the point at which individuals pay the additional rate of 45% is £125,140.
The additional rate for non-savings and non-dividend income will apply to taxpayers in England, Wales and Northern Ireland. The additional rate for savings and dividend income will apply to the whole of the UK.
The personal allowance
The Income Tax personal allowance is fixed at the current level of £12,570 until April 2028.
The marriage allowance
The marriage allowance permits certain couples to transfer £1,260 of their personal allowance to their spouse or civil partner.
The Savings Allowance
This applies to savings income and the available allowance in a tax year depends on the individual’s marginal rate of income tax. Broadly, individuals taxed at up to the basic rate of tax have an allowance of £1,000. For higher rate taxpayers the allowance is £500. No allowance is due to additional rate taxpayers.
Tax on dividends
Currently, the first £500 of dividends is chargeable to tax at 0% (the Dividend Allowance). This £500 is retained for 2025/26.
Dividends received above the allowance are taxed at the following rates for
2025/26: • 8.75% for basic rate taxpayers • 33.75% for higher rate taxpayers • 39.35% for additional rate taxpayers.
The Corporation Tax due on directors’ overdrawn loan accounts is paid at 33.75% and remains unchanged.
Pension tax limits
For 2025/26:
- The Annual Allowance (AA) is £60,000.
- Individuals who have ‘threshold income’ for a tax year of greater than £200,000 have their AA for that tax year restricted. It is reduced by £1 for every £2 of ‘adjusted income’ over £260,000, to a minimum AA of £10,000.
- The Lump Sum Allowance, which relates to the general maximum that may be able to be taken as a tax-free lump sum, is £268,275.
- The Lump Sum and Death Benefit Allowance, which relates to the general maximum that may be able to be taken as a tax-free lump sum in certain circumstances, is £1,073,100
For 2025/26, the limits are as follows:
- • Individual Savings Accounts (ISAs) £20,000
- • Junior ISAs £9,000
- • Lifetime ISAs £4,000 (excluding government bonus) and
- • Child Trust Funds £9,000
High Income Child Benefit Charge
The High Income Child Benefit Charge (HICBC) is a tax charge that applies to higher earners who receive Child Benefit or whose partner receives it. For 2025/26, the income threshold at which HICBC starts to be charged is £60,000
National Insurance contributions
Employees and NICs
From 6 April 2024 the main rate of Class 1 employee NICs is 8%. The employer rate is 13.8%. The government announced that it will increase the employer rate from 13.8% to 15% from 6 April 2025.
From 6 April 2025 the government will increase the Employment Allowance from £5,000 to £10,500
National Living Wage and National Minimum Wage
The government has announced increased rates of the National Living Wage (NLW) and National Minimum Wage (NMW) which will come into force from 1 April 2025. The rates which will apply are as follows:
NLW From 1 April 2025 £12.21
18-20 £10.00
16-17 £7.55
Apprentices £7.55
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