The UK’s business tax regime is forever changing, and 2024 – 2025 is no different. With the new tax year now upon us (6th April 2024 to 5th April 2025), it is essential that business people and company owners across the UK familiarise themselves with the latest tax guidelines, including National Insurance, VAT, corporation tax, and income tax. This guide will provide you with an easily digestible overview of the various taxes paid by business people in the UK and the changes for the new tax year following the 2024 Spring “Budget for Long Term Growth” announced by the Chancellor, Jeremy Hunt, on 6th March 2024.
Income Tax
Income Tax is paid on earnings, including from employment, self-employment profits, rental income, income from trusts, pensions, and interest on savings. The exact rules differ depending on whether you live in England, Wales, Northern Ireland, or Scotland. For most employees, income tax is collected automatically through Pay As You Earn (PAYE) by the employer and paid to HMRC.
England, Wales, and Northern Ireland
There are no changes in the rates of income tax in England, Wales, and Northern Ireland for 2024/25. The three income tax rates will remain at the following levels:
- Income tax allowance (on incomes of £12,570 or less): 0%
- Basic Rate (on incomes between £12,571 and £50,270): 20%
- Higher Rate (on incomes between £50,271 and £125,140): 40%
- Additional Rate (on incomes over £125,140): 45%
The income tax allowance for 2024 / 25 (i.e. the amount of income that can be earned before paying income tax) is unchanged at £12,570.
Scotland
In Scotland, changes have been made to the income tax threshold amounts and a new ‘advanced’ has been introduced for 2024/25. The income tax rates for Scotland for 2024/25 are as follows:
- Starter rate (on incomes between £12,571 and £14,876): 19%
- Basic rate (on incomes between £14,877 and £26,561): 20%
- Intermediate rate (on incomes between £26,562 and £43,662): 21%
- Higher rate (on incomes between £43,663 and £75,000): 42%
- *New* – Advanced rate (on incomes between £75,001 and £125,140): 45%
- Top rate (on incomes £125,140): 48%
As in England, Wales and Northern Ireland, the personal tax allowance in Scotland remains unchanged at £12,570.
National Insurance contributions (NICs)
National Insurance is paid by employees and self-employed workers from the age of 16 until the state pension age of 66, except those who have an income below £12,570, are unemployed, or are receiving benefits.
One of the biggest areas of change for the tax regime in the UK for 2024/25 concerns NICs, including a cut in the main rate for employees by 2% from 10% to 8% from 6th April 2024. In addition, those who are self-employed and have profits over £12,570 will no longer have to pay Class 2 NICs.
The NIC rates for 2024/25 that business owners should be aware of are as follows:
| National Insurance class | National Insurance rates for the 2024-25 tax year | Paid by |
| Class 1 | Reduced from 10% to 8% on earnings over £12,570, and 2% on earnings over £50,270 | Employees |
| Class 2 | n/a | Self-employed individuals |
| Class 3 | £17.45 a week | Voluntary contributions made by those with gaps in their NI record |
Class 4 | 6% on profits over £12,570 2% on profits over £50,270 | Self-employed individuals |
Corporation Tax
Companies are legally required to pay Corporation Tax on any profits from doing business as a limited company, a foreign company with a UK branch or office, a club, a co-operative or other unincorporated association (e.g. a community group or sports club). You must ensure that you:
- Register your company for Corporation Tax when you start doing business (or restart a dormant business)
- Keep and maintain accounting records
- Prepare a Company Tax Return which sets out how much Corporation Tax to pay
- File your Company Tax Return – normally 12 months after the end of your accounting period.
- Pay Corporation Tax – if you have nothing to pay, you still need to report this – payment is normally required 9 months and 1 day after the end of the ‘accounting period’.
Corporation Tax rates and thresholds for 2024-25 remain unchanged from the previous year.
The corporation tax rates for 2024-25 are as follows:
- Small profits rate (profits of £50,000 or less): 19%
- Main rate (profits of £250,000 or above): 25%
- Profits between £50,000 and £250,000: “Marginal relief” will apply, which will provide a tapered increase between the small profits rate and the main rate.
You cannot claim marginal relief on your company’s corporation tax liability if it is a non-UK resident company, close investment holding company, or if your company profits exceed £250,000.
Dividend tax
Dividend tax is charged on any dividend income in excess of the £500 tax-free dividend allowance; this is down from £1,000 last year. Your dividend rate is based on your income tax band. The dividend tax that you will pay as a company director or shareholder is based on your total income and income tax band. If your total personal and dividend income exceeds £50,270, you may need to pay a higher and additional rate of dividend tax.
The dividend tax rates for 2024/25 are as follows:
- Personal allowance (£12,570): 0%
- Basic Rate (£12,571 to £50,270): 8.75%
- Higher Rate (£50,271 to £125,140): 33.75%
- Additional Rate (£125,141 or more): 39.35%
If, as a director or shareholder, you only receive dividends and no other form of income, by adding the personal allowance to the dividend tax allowance, it is possible to earn up to £13,070 in dividends without paying any dividend tax.
Capital Gains Tax
Capital Gains Tax (CGT) is a charge on the profit made when a business / disposes of its assets (e.g. machinery or property). CGT is not paid by companies because any profit made from the sale of assets is included in the annual accounts and is subject to corporation tax.
For 2024-25, the CGT allowance has been decreased from £6,000 to £3,000. The gain made by a business is the difference between the amount paid for the business asset and the amount it was sold for.
CGT may be payable on the profits from the sale of:
- Land and buildings
- Fixtures and fittings
- Plant and machinery
- Shares
- Registered trademarks
Certain CGT reliefs are also available for sole traders and partnerships, including business asset disposal relief (10% on qualifying profits), business asset rollover relief, incorporation relief, and gift hold-over relief. It is advisable to speak to your accountant, who can explain the various CGT relief schemes available to businesses in the UK to lower your tax liability.
Value Added Tax (VAT)
Value Added Tax (VAT) is added to the large majority of products and services sold in the UK by VAT-registered businesses. If you have a VAT-registered business, you are legally required to:
- Add the required amount of VAT to your prices
- Keep records of how much VAT you pay for business-related purchases
- Account for VAT on any goods you import into the UK
- Report how much VAT you have charged and paid every 3 months
- Pay any VAT you owe to HRMC by the deadline provided.
VAT is chargeable for goods and services, hiring or loaning goods, selling business assets, commission, items sold to staff, business goods used for personal reasons, and part-exchanges and gifts.
For 2024-25, the VAT registration threshold has been increased to £90,000 from £85,000. This means that a business must be registered for VAT with HMRC if it has a taxable income in excess of £90,000. Businesses with a lower taxable income can choose to register for VAT.
The threshold at which a business can apply to HMRC to deregister for VAT has also increased by £5,000 from £83,000 to £88,000. The VAT registration and deregistration thresholds in Northern Ireland have increased from £85,000 to £90,000.
Minimum wage rates
The National Minimum Wage applies to employees who are school-leaving age or over, and the National Living Wage is for employees who are age 21 or over.
As of 1st April 2024, the rates of National Living Wage and National Minimum Wage increased are as follows:
- Age 21 +: £11.44
- Age 18-20: £8.60
- Age 17 or under: £6.40
If your business pays staff according to the National Living Wage and National Minimum Wage, it is important that you ensure that these are amended accordingly.
In addition, apprentices are eligible for an ‘apprentice rate’ if they are under the age of 19 or over 19 but in the first year of their apprenticeship. The apprentice rate is £6.40.
Final words
We hope that you found our updated 2024/25 business tax guide helpful in both demystifying some of the aspects of taxation in England, Wales, Northern Ireland, and Scotland and providing the information you need to make amendments to your tax and wage calculations. If you are in any way unsure about any aspect of business taxation in the UK or how to implement the latest changes announced in the budget, speak to your accountant, who can explain how your business will be affected and how to implement the changes.
