The Autumn Budget 2024 has brought several key updates to personal tax policies in the UK. Whether you're a salaried individual, a business owner, or an investor, these changes will affect how you manage your finances. This article is a summary of the most critical updates announced.
Tax Bands and Rates
The basic rate of income tax remains at 20%, with the band of income taxable at this rate frozen at £37,700 until April 2028. This means that individuals will reach the higher rate of 40% once their income exceeds £50,270, provided they are entitled to the full personal allowance.
For those with higher earnings, the additional rate of 45% applies from an income of £125,140.
These thresholds remain aligned across England, Wales, and Northern Ireland for non-savings and non-dividend income, while the same additional rate applies across the UK for savings and dividend income.
Personal Allowance
The Income Tax personal allowance is fixed at £12,570 until April 2028. A reduction mechanism applies for those earning over £100,000, reducing the personal allowance by £1 for every £2 of income above this threshold. As a result, individuals with incomes exceeding £125,140 will not receive a personal allowance.
Marriage Allowance
Couples can transfer £1,260 of their personal allowance to a spouse or civil partner if one partner's income is below the personal allowance threshold. This can result in tax savings of up to approximately £250 per year. Additionally, eligible couples can claim for past years back to 2020/21, potentially saving over £1,000 in total. However, claims for the 2020/21 tax year must be submitted by 5 April 2025.
Savings Income
Savings income, such as bank interest, benefits from the Savings Allowance. The available allowance is determined by an individual's tax band:
- £1,000 for basic rate taxpayers.
- £500 for higher rate taxpayers.
- No allowance for additional rate taxpayers.
Some individuals may qualify for a 0% starting rate on savings income up to £5,000, which is reduced by non-savings income exceeding £5,000.
Tax on Dividends
The Dividend Allowance, which permits the first £500 of dividend income to be tax-free, remains unchanged for 2025/26. Dividends exceeding this allowance will be taxed at the following rates:
- 8.75% for basic rate taxpayers.
- 33.75% for higher rate taxpayers.
- 39.35% for additional rate taxpayers.
These updates highlight the government’s approach of freezing allowances and thresholds while maintaining existing rates, which, in real terms, may increase tax liabilities due to inflation. Reviewing your finances to ensure you’re taking advantage of available allowances and tax-saving opportunities is essential.
If you'd like personalised advice or have questions about how these changes may affect you, please feel free to contact us on 01623 490 120 or email