Comprehensive Guide to UK Business Tax for 2024–25
The landscape of UK business tax is in a constant state of evolution, and the fiscal year 2024–25 brings its own set of updates and changes. As we navigate through the new tax year, which spans from 6th April 2024 to 5th April 2025, it’s crucial for entrepreneurs and company proprietors throughout the UK to acquaint themselves with the latest tax regulations. This includes understanding National Insurance, VAT, corporation tax, and income tax. This guide aims to provide a clear and concise overview of the various taxes that UK businesses are subject to, as well as the recent adjustments announced in the Chancellor’s Spring “Budget for Long Term Growth”.
Income Tax: No Major Shifts but Stay Informed
Income tax is levied on various forms of earnings, such as employment income, self-employment profits, rental income, and interest on savings. The method of collection, typically through the PAYE system, ensures that for most employees, this process is handled by their employer.
England, Wales, and Northern Ireland
The income tax rates remain static for the 2024/25 tax year. The brackets are as follows:
- 0% on incomes of £12,570 or less
- 20% on incomes between £12,571 and £50,270
- 40% on incomes between £50,271 and £125,140
- 45% on incomes over £125,140
The personal allowance is maintained at £12,570.
Scotland
Scotland sees a revision in income tax thresholds and the introduction of a new ‘advanced’ rate for the 2024/25 tax year:
- 19% Starter rate on incomes between £12,571 and £14,876
- 20% Basic rate on incomes between £14,877 and £26,561
- 21% Intermediate rate on incomes between £26,562 and £43,662
- 42% Higher rate on incomes between £43,663 and £75,000
- 45% New Advanced rate on incomes between £75,001 and £125,140
- 48% Top rate on incomes over £125,140
The personal allowance in Scotland also remains at £12,570.
National Insurance Contributions: Key Changes Ahead
National Insurance contributions (NICs) are a significant component of the UK tax system, affecting employees and self-employed individuals alike. The 2024/25 tax year introduces a notable reduction in the main rate for employees from 10% to 8% on earnings above £12,570, effective from 6th April 2024. Furthermore, self-employed individuals with profits exceeding £12,570 are exempt from paying Class 2 NICs.
The NIC rates for 2024/25 are as follows:
- Class 1: 8% on earnings over £12,570 and 2% on earnings over £50,270 for employees
- Class 2: No longer applicable for self-employed individuals
- Class 3: Voluntary contributions at £17.45 a week for those with gaps in their NI record
- Class 4: 6% on profits over £12,570 and 2% on profits over £50,270 for self-employed individuals
Corporation Tax: Status Quo Maintained
Corporation tax is mandatory for limited companies, foreign companies with a UK branch, and certain other entities. The process involves registering for Corporation Tax, maintaining accounting records, preparing and filing a Company Tax Return, and paying the tax due within the stipulated deadlines.
For the 2024–25 tax year, the corporation tax rates and thresholds remain unchanged:
- 19% Small profits rate for profits of £50,000 or less
- 25% Main rate for profits of £250,000 or above
- Marginal relief for profits between £50,000 and £250,000, providing a gradual increase from the small profits rate to the main rate
Dividend Tax and Capital Gains Tax: Adjustments to Note
Dividend tax applies to dividend income exceeding the £500 tax-free allowance. The rates are contingent on your income tax band and total income. The dividend tax rates for 2024/25 are:
- 0% on personal allowance up to £12,570
- 8.75% Basic Rate on incomes up to £50,270
- 33.75% Higher Rate on incomes up to £125,140
- 39.35% Additional Rate on incomes of £125,141 or more
Capital Gains Tax (CGT) is charged on the profit from the disposal of assets, excluding companies which are subject to corporation tax on such profits. The CGT allowance for 2024–25 has been reduced to £3,000. Various CGT reliefs are available to sole traders and partnerships, and it is advisable to consult an accountant for guidance on minimizing tax liabilities.
VAT and Minimum Wage Rates: Essential Updates
Value Added Tax (VAT) is a critical consideration for VAT-registered businesses, which must add VAT to their prices, maintain records, account for VAT on imports, and report and pay VAT to HMRC. The VAT registration threshold has increased to £90,000, and the deregistration threshold is now £88,000.
The National Minimum Wage and National Living Wage rates as of 1st April 2024 are:
- £11.44 for ages 21 and over
- £8.60 for ages 18–20
- £6.40 for ages 17 and under
- £6.40 for apprentices under 19 or in the first year of their apprenticeship
Businesses must ensure compliance with these updated wage rates.
This guide serves to clarify the complexities of UK business tax and provide the necessary information for accurate tax and wage calculations. For any uncertainties or assistance in implementing the latest tax changes, it is recommended to consult with an accountant.
For further insights into UK business tax, please explore our detailed guide to business tax, which offers comprehensive information and support.
