The rise in the National Living Wage (NLW) and National Minimum Wage (NMW) is set to take effect from 1 April 2024.
The NMW, divided into two tiers, is the minimum hourly rate that employers must pay to workers aged between 16 and 20. The NMW applies to full-time, part-time, casual and agency workers and some apprentices. For apprentices aged under 19 and those aged 19 or over in the first year of their apprenticeship, the apprentice rate will instead apply.
The NLW is the minimum hourly rate employers must pay workers aged 21 and over. The threshold to receive the NLW was reduced this year and previously applied to workers aged 23 and over.
What’s the personal allowance?
The personal allowance in 2024/25 will remain £12,570. This is how much you can earn tax-free.
The government has frozen this tax allowance until 2028. Businesses and taxpayers in general are facing rising costs, so could feel the pinch of this personal allowance freeze.
And over the long-term, if earnings rise and the personal allowance stays the same, then you’ll pay more in tax.
UK tax brackets 2024 – income tax
The additional income tax threshold is £125,140 (it reduced from £150,000 in April 2023).
These are the income tax rates and thresholds the self-employed should be aware of in 2024/25:
- basic rate – 20 per cent on income between £12,571 and £50,270 – you pay tax on £37,700
- higher rate – 40 per cent on income between £50,271 and £125,140
- additional rate– 45 per cent on income above £125,140
There are different bands and rates for Scotland.
National Insurance tax rate changes
The self-employed usually pay both Class 2 and Class 4 National Insurance through their annual Self Assessment tax return.
The chancellor announced big changes to National Insurance in the Autumn Statement, so from 6 April 2024 the self-employed no longer need to pay Class 2 National Insurance. And the Spring Budget saw a reduction in the main rate for Class 4 NICs.
Small business owners with staff also need to pay employee National Insurance contributions via payroll.
Tax thresholds for Class 2 NICs and Class 4 NICs
| 2024/25 thresholds | 2023/24 thresholds | |
| No National Insurance incurred between | £0 to £6,724 | £0 to £6,724 |
| Small profits threshold for Class 2 NICs | No longer applies | £6,725 |
| Lower profits limit for Class 4 NICs | £9,880 | £9,880 |
| Upper profits limit | £50,270 | £50,270 |
Here are the National Insurance rates for 2024:
- Class 4 NICs up to the upper profits limit at 8 per cent (for 2024/25 tax year)
- Class 4 NICs above the upper profits limit at 2 per cent (for 2024/25 tax year)
Check the government website for more information.
Employer and employee National Insurance contributions (Class 1)
If you have income from employment, here are the Class 1 National Insurance tax thresholds.
Tax thresholds for Class 1 (primary) National Insurance
| 2024/25 weekly threshold | 2024/25 annual threshold | |
|---|---|---|
| Lower earnings limit | £123 | £6,396 |
| Primary threshold | £242 | £12,570 |
| Upper earnings limit | £967 | £50,270 |
Earnings above the primary threshold incur NICs at 8 per cent in 2024/25.
Earnings above the upper earnings limit incur NICs at two per cent in 2024/25.
Tax thresholds for Class 1 (secondary) National Insurance
Employer NICs are due on annual salary payments to employees above a certain threshold. This is £9,100 in 2024/25 (a weekly threshold of £175).
The rate is 13.8 per cent in 2024/25.
National Insurance is also due at this rate on any work benefits you give employees.
Changes to wage rates for employers
| Rate from April 2024 | Rate from April 2023 | |
|---|---|---|
| National living wage | £11.44 (aged 21+) | £10.42 |
| Rate for 21-22 year olds | National living wage rate applies | £10.18 |
| Rate for 18-20 year olds | £8.60 | £7.49 |
| Rate for 16-17 year olds | £6.40 | £5.28 |
| Apprentice rate | £6.40 | £5.28 |
Read more about the national minimum wage.
Tax rates for dividends in 2024/25
The dividend tax rate is staying the same in 2024/25.
But Jeremy Hunt slashed the dividend allowances in his Autumn Statement, so for 2024/25 you’ll pay dividend tax on the dividends you earn above £500 (instead of £1,000) at these rates:
- basic rate taxpayers – 8.75 per cent
- higher rate taxpayers – 33.75 per cent
- additional rate taxpayers – 39.35 per cent