Tax Allowances

Tax allowances are the amount of income you can earn before you start paying income tax. There are several different types of tax allowances in the UK, including:

• Personal Allowance: This is the amount of income you can earn tax-free each year. The current Personal Allowance for the tax year 2023-24 is £12,570.
• Marriage Allowance: This allows couples to transfer a portion of their Personal Allowance to their spouse or civil partner, reducing their overall tax bill. The current Marriage Allowance for the tax year 2023-24 is £1,260.
• Blind Person’s Allowance: This is an additional tax-free allowance available to those who are registered as blind. The current Blind Person’s Allowance for the tax year 2023-24 is £2,870.
• Trading Allowance: This allows self-employed individuals to earn up to £1,000 tax-free from trading activities. The current Trading Allowance for the tax year 2023-24 is £1,000.
• Property Allowance: This allows individuals to earn up to £1,000 tax-free from property income, such as renting out a room in their home. The current Property Allowance for the tax year 2023-24 is £1,000.

Minimum Wages

The National Minimum Wage is the minimum pay per hour most workers are entitled to by law. The rates are set by the government and reviewed annually. There are different minimum wage rates depending on the worker’s age and whether they are an apprentice. The current minimum wage rates in the UK for the tax year 2023-24 are:

• National Living Wage (for workers aged 23 and over): £10.42 per hour
• Standard Adult Rate (for workers aged 21-22): £10.18 per hour
• Development Rate (for workers aged 18-20): £7.49 per hour
• Young Workers Rate (for workers aged 16-17): £5.28 per hour
• Apprentice Rate: £5.28 per hour

National Insurance Thresholds

National Insurance is a tax on earnings that helps to fund the UK’s welfare state. The amount you pay depends on how much you earn, and there are different thresholds that determine the rate you pay. The current National Insurance thresholds in the UK for the tax year 2023-24 are:

• Lower Earnings Limit: This is the minimum amount you need to earn to qualify for National Insurance credits, which count towards your state pension. The current Lower Earnings Limit for the tax year 2023-24 is £6,396 per year.
• Primary Threshold: This is the amount you need to earn before you start paying National Insurance contributions. The current Primary Threshold for the tax year 2023-24 is £12,570 per year.
• Secondary Threshold: This is the amount at which employers start to pay National Insurance contributions on behalf of their employees. The current Secondary Threshold for the tax year 2023-24 is £9,100 per year.
• Upper Earnings Limit: This is the maximum amount you can earn before you stop paying National Insurance contributions. The current Upper Earnings Limit for the tax year 2023-24 is £50,270 per year.
• Upper Profits Limit for Class 4 National Insurance: This is the maximum amount of profits you can earn as a self-employed person before you stop paying Class 4 National Insurance contributions. The current Upper Profits Limit for the tax year 2023-24 is £50,270

Income Tax Brackets

Income tax is a tax on income that individuals and companies in the UK pay to the government. The amount of income tax you pay depends on how much you earn, and the rates are divided into different income tax brackets. The current income tax brackets in the UK for the tax year 2023-24 are:

• Basic Rate: 20% tax on income from £12,571 to £50,270
• Higher Rate: 40% tax on income from £50,271 to £125,140
• Additional Rate: 45% tax on income over £125,140

If your adjusted net income is above £100,000 it is subject to a reduced Personal Allowance.

Dividend Tax Allowances and Brackets

Dividend tax is a tax on the income earned from shares that pay dividends. There is a tax-free allowance and different tax brackets for dividends. The current dividend tax allowances and brackets in the UK for the tax year 2023-24 are:

• Dividend Allowance: £1,000 tax-free allowance
• Basic Rate: 8.75% tax on dividends above the £1,000 allowance and up to the basic rate tax threshold
• Higher Rate: 33.75% tax on dividends above the basic rate tax threshold and up to the higher rate tax threshold
• Additional Rate: 39.35% tax on dividends above the higher rate tax threshold

Pension Contributions

Pensions are a way to save for retirement, and contributions can come from individuals, employers, or both. The amount you can contribute to your pension each year without incurring additional taxes depends on your age and earnings. The current pension contribution limits in the UK for the tax year 2023-24 are:

• Annual Allowance: £60,000 or 100% of your earnings, whichever is lower (unless you’re a super high earner)
• Money Purchase Annual Allowance: £10,000 if you have started to take income from your pension
• Lifetime Allowance: £1,073,100 – this was the maximum amount of pension savings you could accumulate without incurring additional tax. It is to be abolished in the next tax year. This year it will be measured against, however, no charge will need to be paid

It’s important to note that these tax allowances, minimum wages, national insurance thresholds, income tax brackets, dividend tax allowances and brackets, and pension contributions can change from year to year, so it’s always a good idea to check for updates.