The standard personal tax allowance for the 2024/25 tax year is £12,570, which remains frozen at the same level as the previous year. This means most UK residents can earn up to this amount before they are required to pay any Income Tax to HMRC. In addition to the personal allowance, taxpayers may benefit from various other specific reliefs, including the £500 dividend allowance, the £3,000 Capital Gains Tax exemption, and the £1,000 personal savings allowance for basic-rate earners.
Personal Allowance 2024
The Personal Allowance is the primary tax-free threshold for individuals in the UK, currently set at £12,570 for the 2024/25 tax year. This allowance is applied automatically to most employees through their tax code (typically 1257L), ensuring that the first portion of their annual salary is paid without any Income Tax deductions.
For high earners, this allowance begins to taper once “adjusted net income” exceeds £100,000. For every £2 earned above this six-figure mark, the Personal Allowance is reduced by £1, meaning anyone earning £125,140 or more loses their tax-free threshold entirely. This “hidden” 60% effective tax rate in the tapering zone makes pension contributions and gift aid donations popular strategies for reducing adjusted net income.
Dividend Allowance Changes
The Dividend Allowance has seen a significant reduction for the 2024/25 tax year, dropping from £1,000 down to just £500. This allowance allows investors and company directors to receive a small portion of profit distributions completely tax-free, regardless of their other income levels.
Once your dividend income exceeds this £500 limit, the tax rates applied depend on your total income band: 8.75% for basic rate taxpayers, 33.75% for higher rate, and 39.35% for additional rate. Because this threshold has halved, many small shareholders who previously had no tax to pay on their portfolios may now be required to report this income to HMRC for the first time.
Capital Gains Exemption
The Capital Gains Tax (CGT) annual exempt amount has been reduced to £3,000 for the 2024/25 tax year, down from £6,000 in the previous year. This exemption applies to the profit made when selling or “disposing of” an asset that has increased in value, such as second homes, shares not held in an ISA, or valuable personal possessions.
For gains exceeding this £3,000 threshold, the tax rates have also seen adjustments. While the main CGT rates for basic rate taxpayers are 10% (rising to 18% later in the year) and 20% (rising to 24%) for higher rate taxpayers, the rate for residential property was specifically reduced from 28% to 24% for the higher band to encourage market activity.
Marriage Allowance Benefits
The Marriage Allowance allows a lower-earning spouse or civil partner to transfer £1,260 of their unused Personal Allowance to their higher-earning partner. To be eligible, the lower-earner must have an income below the £12,570 threshold, and the recipient must be a basic-rate taxpayer (earning between £12,571 and £50,270).
This transfer can reduce the couple’s collective tax bill by up to £252 per year. One of the most valuable aspects of this relief is the ability to backdate claims for up to four previous tax years, which can result in a lump-sum refund exceeding £1,200 if the couple has been eligible but hasn’t yet applied.
Personal Savings Allowance
The Personal Savings Allowance (PSA) enables individuals to earn interest on their savings without paying tax, with the limit determined by their Income Tax band. Basic-rate taxpayers receive a £1,000 allowance, while higher-rate taxpayers are limited to £500; additional-rate taxpayers receive no savings allowance at all.
This allowance covers interest from bank accounts, building societies, credit unions, and even certain government bonds. Most banks now pay interest “gross” (without tax deducted), meaning it is the responsibility of the taxpayer to monitor their total interest and ensure they stay within these limits or report any excess to HMRC.
Starting Rate for Savings
The Starting Rate for Savings provides an additional 0% tax band of up to £5,000 for individuals with low earned income. This relief is specifically designed for those whose wages, pensions, or other non-savings income are less than £17,570 per year.
For every £1 of “other” income earned above the Personal Allowance (£12,570), the £5,000 starting rate is reduced by £1. For example, if you earn £15,000 in wages, your starting rate for savings would be reduced to £2,570. This can be combined with the Personal Savings Allowance, allowing some retirees to earn significant interest entirely tax-free.
Trading and Property Allowances
The Trading Allowance and Property Allowance are two separate £1,000 exemptions designed to simplify tax for people with small amounts of casual income. The Trading Allowance covers income from self-employment, “gig economy” tasks, or selling items online, while the Property Allowance applies to income from renting out land or space (excluding the Rent a Room Scheme).
If your annual gross income from either of these sources is £1,000 or less, you do not need to report it to HMRC or pay any tax on it. If your income is higher, you can choose to deduct this £1,000 allowance from your gross turnover instead of calculating actual business expenses, which is often easier for those with low overheads.
ISA Annual Limits 2024
The Individual Savings Account (ISA) allowance remains at £20,000 for the 2024/25 tax year, providing a powerful “wrapper” that protects all interest, dividends, and capital gains from UK tax. This limit can be split across different types of ISAs, including Cash, Stocks and Shares, and Innovative Finance ISAs.
Specific limits apply to specialized accounts: the Lifetime ISA (LISA) has a yearly contribution limit of £4,000 (which counts toward the overall £20,000), while the Junior ISA (JISA) limit for children is £9,000. New rules introduced in April 2024 now allow savers to open and pay into multiple ISAs of the same type within a single tax year, offering much greater flexibility for those chasing the best interest rates.
Rent a Room Scheme
The Rent a Room Scheme allows owner-occupiers and tenants to earn up to £7,500 per year tax-free from letting out furnished accommodation in their main home. This threshold is halved to £3,750 if the income is shared with a partner or another person.
This is a “gross” limit, meaning it includes any payments for meals, laundry, or cleaning services provided to the lodger. If your rental income is below this threshold, the tax exemption is automatic; if it is higher, you must complete a tax return and choose between claiming the £7,500 relief or deducting actual expenses.
Blind Person’s Allowance
The Blind Person’s Allowance is an additional tax-free amount for individuals who are registered as blind or severely sight-impaired. For the 2024/25 tax year, this allowance is £3,070, which is added to the standard Personal Allowance to increase the total amount of income a person can receive before paying tax.
If an individual’s income is too low to use the full allowance, they can transfer the remaining portion to their spouse or civil partner. This is a separate benefit from the Marriage Allowance, and eligible couples may be able to utilize both to significantly lower their household tax liability.
Practical Information and Planning
Navigating the 2024 tax landscape requires keeping track of several key dates and thresholds to ensure you don’t miss out on valuable reliefs. The UK tax year begins on April 6th and ends on April 5th of the following year. Most allowances, such as the ISA limit and the CGT exemption, operate on a “use it or lose it” basis, meaning they do not roll over to the next year if they are not utilized.
Key Deadlines and Costs
April 5, 2025: Last day of the 2024/25 tax year and the deadline to use your annual ISA, CGT, and Gift Aid allowances.
October 5, 2025: Deadline to register for Self Assessment if you have new income sources (like dividends over £500) that require reporting.
January 31, 2026: Deadline for filing your online 2024/25 tax return and paying any remaining tax owed.
Costs: There is no fee to claim most allowances through HMRC, but late filing of a tax return typically results in an immediate £100 penalty, even if no tax is owed.
What to Expect
When you claim an allowance, such as the Marriage Allowance or the Blind Person’s Allowance, HMRC will usually update your tax code. This ensures that the relief is applied directly to your monthly or weekly pay, resulting in a higher take-home amount. If you are self-employed or have high investment income, you will apply these allowances manually when completing your annual Self Assessment.
Tips for Maximizing Relief
To get the most out of your 2024 tax allowances, consider “bed and ISA-ing” your investments—selling shares to use your £3,000 CGT allowance and immediately rebuying them within an ISA to protect future gains. Additionally, if you are approaching the £100,000 income threshold, increasing your pension contributions can keep your Personal Allowance intact and effectively save you 60% in tax and lost benefits.
FAQs
What is the standard personal tax allowance for 2024?
The standard personal allowance is £12,570. This is the amount of income you can earn in the 2024/25 tax year without paying any Income Tax.
Has the dividend allowance changed for 2024?
Yes, the dividend allowance has been reduced to £500 for the 2024/25 tax year. This is a 50% decrease from the £1,000 allowance available in the previous year.
How much is the Capital Gains Tax allowance in 2024?
For the 2024/25 tax year, the annual exempt amount for Capital Gains Tax is £3,000. Any profits from the sale of assets above this amount are subject to CGT.
Can I still claim the Marriage Allowance if my partner is a higher-rate taxpayer?
No, the recipient of the Marriage Allowance must be a basic-rate taxpayer. If the higher earner’s income exceeds £50,270 (£43,662 in Scotland), the couple is ineligible for the transfer.
How does the Personal Savings Allowance work in 2024?
It allows you to earn interest tax-free up to a certain limit: £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers. Additional-rate taxpayers do not get this allowance.
What is the ISA allowance for the 2024/25 tax year?
The annual ISA subscription limit is £20,000. You can put this entire amount into one type of ISA or split it between different types, such as Cash and Stocks and Shares.
Do I need to report the Trading Allowance if I earn £800?
No, if your total gross trading income is £1,000 or less, it is covered by the Trading Allowance and does not need to be reported to HMRC.
What happens to my Personal Allowance if I earn over £100,000?
Your Personal Allowance is reduced by £1 for every £2 your “adjusted net income” is above £100,000. It disappears completely once you reach £125,140.
How much can I earn tax-free from a lodger in 2024?
Under the Rent a Room Scheme, you can earn up to £7,500 per year tax-free. This applies if you are letting out a furnished room in your main residence.
Is there an allowance for blind people in 2024?
Yes, the Blind Person’s Allowance for 2024/25 is £3,070. This amount is added to your existing Personal Allowance.
Can I carry over my unused tax allowances to next year?
No, almost all UK tax allowances, including the ISA, CGT, and Personal Allowance, are on a “use it or lose it” basis and do not roll over.
When does the 2024/25 tax year officially end?
The 2024/25 tax year ends on April 5, 2025. You must ensure all tax-saving actions are completed by midnight on this date.
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