Individual Tax Changes in Personal Allowance 2024/2025

Understanding individual tax changes in personal allowance is essential for anyone managing their personal finances in the UK. Each year, the government may adjust the personal allowance—a threshold that defines how much income you can earn before you start paying income tax.

These changes can have a direct impact on your take-home pay, savings, and financial planning. In this article, we’ll break down the latest updates on individual tax changes in personal allowance and explain what they mean for your pocket, helping you stay prepared and make the most of your income.

Allowances for 2024/25 are

  • The Personal Allowance (born after 5 April 1948): £10,500
  • Personal allowance (born between 6 April 1938 and 5 April 1948): £12,570
  • Personal allowance (born before 6 April 1938): £10,660
  • Minimum married couples allowance*: £4,010
  • Maximum married couples allowance*: £10,375
  • Blind person’s allowance: £3,070
  • The income limit for allowances for age-related allowances: is £27,000
  • The income limit for standard allowances: is £100,000

Given where one partner was born before 6 /4/1935, as a 10% reduction in tax due.

Married Couple Allowance

Married and civil partners can transfer up to £1,260 of their allowance to their spouse effective from April 6, 2024.  This amount will increase if the total personal allowance increases year on year. However, the transfer can only take effect if both members of the couple are basic rate taxpayers or pay no income tax for the year.

Tax Rates and Thresholds

The income tax bands for 2024/25 are:

  1. Basic rate (20%) – 0 to £37,700
  2. Higher rate (40%) – £37,701 to £125,140
  3. Additional rate (45%) – Above £125,140

Interest Relief

Currently, individuals can claim tax relief on interest paid on loans that are used to invest in UK companies. In which they have a significant interest, employee-controlled companies, and partnerships in which the individual is a partner.

From 6 April 2024, this tax relief will also be available if the company is resident outside the UK but within the European Economic Area. The interest relief will still be capped at the greater of £50,000 and 25% of the taxpayer’s income for the year.

State Pension Age

The State Pension Age (SPA) is currently being aligned at 65 for men and women who are reaching that age in the next few years. The SPA will then rise for both men and women to 66, and increase to 67 for those that reach that age between 2034 and 2036.

The government is reviewing how quickly the state pension age should be changed. It is likely to accelerate the SPA to age 67, 68, and then to 69 for people who are currently in their early 30’s.

NI Contributions Over SPA

Individuals who retire today must have an NI contributions record showing 30 full years of contributions in order to receive the full state pension. However, once a person reaches state pension age (SPA) they can’t make further NI contributions, even voluntarily.

From October 2015 the government permitted  people who had reached SPA to make voluntary NICs top up their NI contributions record for state pension purposes. This applied to people who reached SPA before 6 April 2016.

ISAs

The tax-free ISA investment limits for 2024/25 are as follows:

  • Shares and cash ISA – £20,000
  • Cash only ISA – £20,000
  • Junior ISA and Child Trust Fund – £9,000

Are you looking for professional tech-savvy tax advisors and accountants in the UK to guide you? Contact us now!

Last Words

In conclusion, understanding individual tax changes in personal allowance is key to effective financial planning. As the government adjusts allowances, it can impact how much of your income is tax-free, influencing your overall tax bill.

Staying updated on these changes helps you plan better, manage your finances, and ensure you’re not paying more tax than you should. Remember, a little time spent keeping informed can make a big difference to your financial well-being in the long run.

Disclaimer: The information about Individual Tax changes in Personal Allowance, provided in this article including text and graphics. It does not intend to disregard any of the professional advice.

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