Personal tax allowance
UK taxpayers can earn £12,570 before paying income tax in tax year 2024/25.
The rates for UK taxpayers (excluding Scotland) after taking account of the personal allowance are:
- 20% basic rate on taxable income up to £37,700
- 40% higher rate on taxable income between £37,701 – £125,140
- 45% additional rate on taxable income over £125,140
The rates for Scottish taxpayers after taking account of the personal allowance are:
- 19% starter rate on taxable income up to £2,306
- 20% basic rate on taxable income over £2,306
- 21% intermediate rate on taxable income over £13,991
- 42% higher rate on taxable income over £31,092
- 45% advanced rate on taxable income over £62,430
- 47% top rate on taxable income over £125,140
For both, for every £2 that you earn above £100,000, the Personal Allowance reduces by £1. This means if you earn £125,140 or more, your personal tax allowance is zero.
These income tax thresholds will be frozen until tax year 2027/2028, pulling more tax payers into higher and additional rates than if thresholds had continued to rise with CPI inflation.
Dividend allowance
If income that you receive from dividends (from share ownership for example) falls within your personal allowance, you do not need to pay tax on it. You also get a dividend allowance each year – for 2024/25 it’s £500. How much tax you pay on dividend income over the allowance depends on which income tax band you’re in.
Rates are as follows:
| Basic rate | 8.75% tax rate on dividends over the allowance |
| Higher rate | 33.75% tax rate on dividends over the allowance |
| Additional rate | 39.35% tax rate on dividends over the allowance |
To work out your tax band, add your total dividend income to your other income.
Capital gains exemption
You pay capital gains tax when you sell various assets, such as personal possessions (apart from your car), cryptoassets or a property that’s not your main home. The capital gains tax-free exemption is £3,000, and up to £1,500 for trusts.
Where the gain exceeds the annual exemption, for gains arising after 30 October 2024, basic rate tax payers pay 18% tax on any gain with higher and additional rate taxpayers, personal representatives and trusts paying 24% . Prior to 30 October 2024 the rates were 10% for basic rate tax payers with an 8% surcharge in respect of gains in relation to residential properties and 20% for other tax payers with a 4% surcharge for residential property gains.
Various reliefs are available including Business Asset Disposal Relief – speak with your financial adviser for more information.
Inheritance Tax threshold
Everyone is entitled to a threshold, known as the nil rate band which currently stands at £325,000. If you leave assets worth £325,000 or less, there is no Inheritance Tax (IHT) to pay. Further, there is a special threshold, known as the residence nil rate band which applies in respect of residential property passing to direct descendants.
This threshold is currently £175,000. If you leave wealth above these amounts the value will generally be liable to IHT at 40% in tax year 2024/25. If you are leaving assets/property that will tip your estate over these thresholds – frozen until 2028 – careful planning will minimise the impact on your family, who may not be prepared for a large tax bill.
Gifts made less than seven years before your death will be added to the value of your estate and use your £325,000 allowance, although if gifts are more than this the resulting death tax charge does taper according to how recently the gifts were made.
Personal savings allowance
The personal savings allowance is £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. It can be used against interest income, including bond chargeable event gains.
Marriage/civil partnership allowances
The marriage allowance for married couples and civil partners is also known as the transferable tax allowance. You’re allowed to transfer £1,260 of your personal allowance to your spouse or civil partner to give them a tax credit. You can do this if neither of you is liable to income tax at a higher rate than the basic rate (or the 21% intermediate rate if in Scotland).
Dividend income is a consideration when calculating the highest rate at which either of you are taxed.
If one of you was born before 6 April 1935, you can claim the married couple’s allowance (MCA), which is usually more beneficial. It works by deducting 10% of the allowance from the tax due on your taxable income. The full allowance is £11,080 for 2024/25, so you can deduct a maximum of £1,108 from your income tax bill. The MCA is reduced when one of you earns more than the set limit for the year. The income limit is £37,000 for 2024/25. But which spouse or partner’s income cannot go over the threshold depends on whether you were married before or after 5 December 2005, so it’s worth taking financial advice.
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As of April 2026, individuals in the UK who are registered for Self Assessment and receive income from self-employment or property, with a qualifying income exceeding £50,000 in the 2024–2025 tax year, will be required to comply with Making Tax Digital for Income Tax (MTD for ITSA).
This means that from April 2026, these individuals must:
- Keep digital records of their income and expenses.
- Submit quarterly updates to HM Revenue & Customs (HMRC) detailing their income and expenses.
- Provide an end-of-period statement at the end of the tax year.
- Submit a final declaration by 31 January following the end of the tax year.
If your qualifying income is between £30,000 and £50,000, you will need to comply with MTD for ITSA from April 2027.
Individuals with a qualifying income of £30,000 or less are currently not required to use MTD for ITSA.
It’s important to note that the government has announced plans to extend MTD for ITSA to individuals with a gross income from self-employment and property of more than £20,000 in the future, though the exact timeline for this implementation has not yet been confirmed.
For those who are not required to use MTD for ITSA, the traditional Self Assessment process remains in place.
If you are unsure about your obligations or need assistance with the transition to MTD for ITSA, it’s advisable to consult with a tax professional or refer to the official HMRC guidance.
ata protection fee: what you need to do
You need to pay unless you’re exempt
It’s the law to pay the data protection fee, which funds the ICO’s work, but it also makes good business sense. Whether or not you have paid the fee could have an impact on your reputation. Paying the fee and being listed on the ICO’s register of fee payers shows that your company take data protection seriously. It is a strong message for your customers – it lets them know that you value and care about their information. It also lets other organisations know that you run a tight ship.
Most companies will only need to pay £40 or £60 a year. For large organisations the fee is £2,900.
If you need to pay and don’t pay, you could be fined.
If you’ve received an ICO fee letter, you should act now
We run regular campaigns to remind small companies and SMEs of their legal responsibility to pay a data protection fee.
If you’ve received a letter from the ICO quoting your Companies House number, we hope this came as a useful reminder that you need to either pay your fee or let the ICO know you’re exempt, so we can update our records.
You need to act now, either:
- if you need to pay, visit ico.org.uk/fee and click ‘first time payment’ if you haven’t registered with the ICO before, or ‘renew’ if you have registered before. You must complete the online application before sending your payment. It takes about 15 minutes. You can save time, hassle and money each year by setting up a Direct Debit, which deducts £5 from your fee;
- if you’ve received a letter from the ICO quoting your Companies House number and you don’t need to pay, complete the form at ico.org.uk/no-fee to let the ICO know why your company is exempt from paying the fee; or
- if you’re not sure if you’re exempt, you can take our online self-assessment at ico.org.uk/fee-checker.
The fee funds the ICO’s data protection work
We’re here to help. We run a dedicated advice service for small organisations including a helpline and livechat service which is open Monday-Friday from 9am to 5pm (excluding bank holidays).
Whether you’re a sole trader, someone who works for themselves, a small business owner, a small charity, a representative from a small school or town council, a start-up, or a small- to medium-sized enterprise, you’ll find a range of toolkits and checklists on data protection hub for small organisations to help you understand and comply with your data protection obligations.
To start a new conversation, you can call our helpline on 0303 123 1113, or for tailored, bite-sized advice and FAQs you can visit the SME hub.
A CT61 is a tax form that is used by companies in the UK to report and pay interest or other income on which tax has been deducted at source (also known as Income Tax on interest payments). The form is typically used by businesses to report interest paid to non-resident companies or other recipients who are subject to tax under the Income Tax (Non-Residents) Regulations.
When is the CT61 required?
You are required to complete and submit a CT61 form to HMRC under the following conditions:
- Interest Paid to Non-Residents: If your company pays interest to non-residents or other specified parties where tax has been deducted at source.
- Other Types of Income: It can also be used to report other income where tax has been withheld at source.
- Quarterly Filings: A CT61 must be filed every quarter (i.e., every three months). You’ll need to submit it four times a year, even if you don’t owe any tax for that period.
- Specific Deadlines: The CT61 has deadlines based on the quarter you’re filing for. The deadlines are as follows:
- For the period 1st January to 31st March: Submit by 14th April.
- For the period 1st April to 30th June: Submit by 14th July.
- For the period 1st July to 30th September: Submit by 14th October.
- For the period 1st October to 31st December: Submit by 14th January.
Key points to note:
- Tax Payment: If you owe tax, it should be paid by the deadline for submitting the CT61.
- Late Filing and Payments: If you miss the deadline for submission or payment, HMRC may charge penalties and interest on overdue amounts.
- Online Filing: You can file the CT61 form online through HMRC’s online services.
Example situations when you’d need to file:
- A company paying interest to a non-resident entity and deducting tax from that interest payment.
- Reporting income on which tax is withheld at source by your company.
MTD (Making Tax Digital) for Personal Tax is part of a broader initiative by HMRC to modernise the UK tax system and make it easier for individuals and businesses to manage their taxes. MTD aims to simplify tax reporting and ensure that tax is paid more efficiently and accurately.
MTD for Personal Tax
MTD for Personal Tax refers to the system where individuals (specifically the self-employed, landlords, and those with income outside of PAYE) are required to report their income and expenses digitally to HMRC. The idea is to make the tax reporting process more seamless by using software, rather than traditional paper-based forms, and to keep HMRC’s records up to date in real-time.
Key Points of MTD for Personal Tax:
- Digital Record Keeping: People need to keep records of their income and expenses in a digital format (using HMRC-approved software). This could be through accounting software or spreadsheets that meet MTD standards.
- Quarterly Reporting: Instead of submitting one annual tax return, individuals will be required to submit quarterly updates of their income and expenses through MTD-compatible software. This allows HMRC to have up-to-date information and reduces the risk of underpayment or errors.
- End of Year Final Submission: At the end of the year, a final submission will need to be made summarising the total income and tax for the year. This is not a full tax return like the old self-assessment process, but rather a confirmation of income and deductions after the quarterly updates.
- Deadline for Implementation: As of April 2026, HMRC will require most individuals with self-employed income or rental income over £10,000 per year to follow MTD for Personal Tax. The government has phased this in gradually, with the full scope of the scheme expected by this date.
Who Needs to Complete MTD for Personal Tax?
The following individuals will need to follow MTD for Personal Tax:
- Self-Employed Individuals: If you are self-employed and earning income above the £1,000 trading allowanceor running a business that needs to report taxes, you will be required to use MTD for Personal Tax once the system is fully in place.
- Landlords: If you have rental income above £10,000 per year, MTD will apply to you, and you will need to keep digital records of your rental income and expenses.
- Other Individuals with Non-PAYE Income: If you have other income (e.g., from savings, dividends, investments, etc.) that exceeds the personal tax allowance and requires tax reporting, you may also be required to comply with MTD requirements.
- Income over £10,000: If you have income from self-employment or property (or a combination of both) over £10,000 a year, you’ll need to file digitally under MTD for Personal Tax by 2026.
Exemptions:
- Employees with only PAYE income (wages or salary) will not need to use MTD for Personal Tax.
- Those with income below £10,000 from self-employment or property might be exempt.
What Should You Do?
If you’re required to comply with MTD for Personal Tax, you’ll need to:
- Register for MTD: Register for the system through HMRC’s portal.
- Use Approved Software: You will need accounting software that is MTD-compliant such as our own to make the relevant submissions.
- Submit Quarterly Updates: After tracking your income and expenses digitally, submit quarterly updates through your MTD-compatible software.
- Final Submission: At the end of the year, submit a final summary of your earnings and tax due for that period.