Simply Business homepage
  • Business insurance

    • Business Insurance FAQs

    Business insurance covers

  • Support
  • Claims
  • Sign In
Call Us0333 0146 683
Our opening hours

Self-employed tax brackets 2024/25: new thresholds, rates, and allowances

5-minute read

self-employed-tax-changes.jpg
Catriona Smith

Catriona Smith

1 March 2024

Share on FacebookShare on TwitterShare on LinkedIn

What will self-employment tax be for 2024/25? There are usually new UK tax brackets and other updates to thresholds introduced each April.

So here are eight self-employed tax changes to understand for the new tax year, from National Insurance reforms to business rates changes.

Tax changes small businesses need to know

The new tax year starts on 6 April every year, and with that often comes a range of new tax rates and thresholds. Here's what you need to know for the tax year 2024/25:

  1. Personal allowance rates

1. What’s the personal allowance?

The personal allowance in 2024/25 will remain £12,570. This is how much you can earn tax free.

The government has frozen this tax allowance until 2028. Businesses and taxpayers in general are facing rising costs, so could feel the pinch of this personal allowance freeze.

And over the long-term, if earnings rise and the personal allowance stays the same, then you’ll pay more in tax.

2. UK tax brackets 2024 – income tax

The additional income tax threshold is £125,140 (it reduced from £150,000 in April 2023).

These are the income tax rates and thresholds the self-employed should be aware of in 2024/25:

  • basic rate – 20 per cent on income between £12,571 and £50,270 – you pay tax on £37,700
  • higher rate – 40 per cent on income between £50,271 and £125,140
  • additional rate– 45 per cent on income above £125,140

There are different bands and rates for Scotland.

3. National Insurance tax rate changes

The self-employed usually pay both Class 2 and Class 4 National Insurance through their annual Self Assessment tax return.

The chancellor announced big changes to National Insurance in the Autumn Statement, so from 6 April 2024 the self-employed no longer need to pay Class 2 National Insurance.

Small business owners with staff also need to pay employee National Insurance contributions via payroll.

Tax thresholds for Class 2 NICs and Class 4 NICs

2024/25 thresholds

2023/24 thresholds

No National Insurance incurred between

£0 to £6,724

£0 to £6,724

Small profits threshold for Class 2 NICs

No longer applies

£6,725

Lower profits limit for Class 4 NICs

£9,880

£9,880

Upper profits limit

£50,270

£50,270

Here are the National Insurance rates:

  • Class 4 NICs up to the upper profits limit at 9 per cent (for 2023/24 tax year)
  • Class 4 NICs above the upper profits limit at 2 per cent (for 2023/24 tax year)

Check the government website for more information.

Employer and employee National Insurance contributions (Class 1)

If you’re an employer, or also have income from employment, here are the Class 1 National Insurance tax thresholds.

Tax thresholds for Class 1 (primary) National Insurance

2024/25 weekly threshold

2024/25 annual threshold

Lower earnings limit

£123

£6,396

Primary threshold

£242

£12,570

Upper earnings limit

£967

£50,270

Earnings above the primary threshold incur NICs at 10 per cent in 2024/25.

Earnings above the upper earnings limit incur NICs at two per cent in 2024/25.

Tax thresholds for Class 1 (secondary) National Insurance

Employer NICs are due on annual salary payments to employees above a certain threshold. This is £9,100 in 2024/25 (a weekly threshold of £175).

The rate is 13.8 per cent in 2024/25.

National Insurance is also due at this rate on any work benefits you give employees.

4. Changes to wage rates for employers

Rate from April 2024

Rate from April 2023

National living wage

£11.44 (aged 21+)

£10.42

Rate for 21-22 year olds

National living wage rate applies

£10.18

Rate for 18-20 year olds

£8.60

£7.49

Rate for 16-17 year olds

£6.40

£5.28

Apprentice rate

£6.40

£5.28

Read more about the national minimum wage.

5. Tax rates for dividends in 2024/25

The dividend tax rate is staying the same in 2024/25.

But Jeremy Hunt slashed the dividend allowances in his Autumn Statement, so for 2024/25 you’ll pay dividend tax on the dividends you earn above £500 (instead of £1,000) at these rates:

  • basic rate taxpayers – 8.75 per cent
  • higher rate taxpayers – 33.75 per cent
  • additional rate taxpayers – 39.35 per cent

6. Making Tax Digital on track for April 2026

Self Assessment taxpayers have until April 2026 to start using Making Tax Digital for income tax. Initially this will apply to those with an income over £50,000 and then those earning £30,000 to £50,000 will need to use the system from April 2027.

Those earning less than £30,000 won’t be required to file using Making Tax Digital (at least for now).

Making Tax Digital was first rolled out in 2019 for VAT-registered businesses with a taxable turnover of more than £85,000. And it came in for all other VAT-registered businesses in 2022.

This system requires businesses to keep digital records and file VAT returns digitally. Businesses need to use relevant accounting software.

7. Changes to business rates

Retail, hospitality, and leisure businesses should be aware of the business rates changes for 2024.

Business rates are now based on a new rateable value. This is to take into account changes in property value since 2017.

This was first introduced in April 2023, but the government brought in a relief for retail, hospitality, and leisure businesses to help with the transition.

However, this relief is set to end in April 2024 and business rates are likely to soar for small businesses.

You can estimate your business rates using the government’s online calculator. There are different rates for businesses with premises in Scotland and Northern Ireland.

8. Tax credits – self-employed changes

Working tax credits are coming to an end, and people claiming solely working tax credit should be migrated to Universal Credit before the start of the 2024/25 tax year. The remaining people claiming will be migrated by the start of the 2025/26 financial year.

Make sure you check your tax credits information and how this could impact your Self Assessment.

Other UK tax brackets 2024

  • the capital gains tax allowance for individuals will be halved to £3,000 from April 2024 (it’s £1,500 for trustees) and full expensing is now permanent

  • council tax for second homes and owners of empty properties is rising to a premium rate for 2024/25 (depending on your local authority)
  • dividend tax allowance is changing to £500
  • fuel duty is increasing by 5p
  • basis period reforms mean business profits will be taxed based on the tax year rather than their individual accounting periods
  • two years to go until the new HMRC penalty points system comes in for Self Assessment taxpayers (starting in April 2026 for those with an income over £50,000)
  • the Individual Savings Account (ISA) allowance is staying at £20,000, but savers (from April 2024) can put money into more than one type of ISA each tax year – the government hopes this will encourage competition in the market
  • the plastic packaging tax rate changes from 1 April 2024 in line with the Consumer Price Index
  • pension changes from April 2024 include scrapping the lifetime allowance
  • annual flat rate road tax will increase from 1 April by about six per cent (and only electric vehicles will be exempt from VED)
  • research and development (R&D) relief reforms – the research and development expenditure credit and R&D SME scheme are merging into one

Keep an eye on the Spring Budget for the latest tax news

Other tax changes could be announced in the Spring Budget on Wednesday, 6 March. Rumours include income tax threshold changes, child benefit reforms, and an update to ISAs.

Keep an eye on the Knowledge centre for all the latest resources and news for small businesses and the self-employed.

Small business guides and resources

Please use this article as a guide and get professional tax advice on self-employed tax brackets if you're not sure about anything.

Looking for self-employed insurance?

As one of the UK's biggest self-employed insurance providers, we specialise in public liability insurance and protect more trades than anybody else. Why not take a look now and build a quick, tailored quote?

Start your quote
Photograph: Andrey Popov/stock.adobe.com
Catriona Smith

Written by

Catriona Smith

Catriona Smith is a content and marketing professional with 12 years’ experience across the financial services, higher education, and insurance sectors. She’s also a trained NCTJ Gold Standard journalist. As a Senior Copywriter at Simply Business, Catriona has in-depth knowledge of small business concerns and specialises in tax, marketing, and business operations. Catriona lives in the seaside city of Brighton where she’s also a freelance yoga teacher.

We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer

Find this article useful? Spread the word.

Share on Facebook
Share on Twitter
Share on LinkedIn

Keep up to date with Simply Business. Subscribe to our monthly newsletter and follow us on social media.

Subscribe to our newsletter

Categories

HomePopular articlesGeneral businessGuestInsuranceLandlordLandlord resourcesLegal and financeMarketingNewsOpinionProperty maintenanceTradesmanCovid-19 business support hub

Insurance

Public liability insuranceBusiness insuranceProfessional indemnity insuranceEmployers’ liability insuranceLandlord insuranceTradesman insuranceSelf-employed insuranceRestaurant insuranceVan insuranceInsurers

About

About usOur teamAwardsPress releasesPartners & affiliatesOur charitable workModern Slavery ActSection 172 statementSocial mediaSite map

Customer support

Contact & supportPolicy renewalMake a claimProof of policyComplaintsAccessibility

Address

6th Floor99 Gresham StreetLondonEC2V 7NG

Northampton 900900 Pavilion DriveNorthamptonNN4 7RG

Careers

Careers at Simply BusinessTech careersCurrent opportunities

Benefits

BenefitsRefer a friendFinance

Legal

Terms & conditionsPrivacy policyCookie policyVuln Disclosure policy

Knowledge

Knowledge centreOpinionsMicrosites

© Copyright 2024 Simply Business. All Rights Reserved. Simply Business is a trading name of Xbridge Limited which is authorised and regulated by the Financial Conduct Authority (Financial Services Registration No: 313348). Xbridge Limited (No: 3967717) has its registered office at 6th Floor, 99 Gresham Street, London, EC2V 7NG.