Income Tax 23/24
The Personal Allowance (PA) for the tax year 23/24 is £12,570 but if your net adjusted income exceeds £100K, the PA will be reduced by one half of the excess income.
After deduction of PA, tax rate is 20% for Income £12,570-£37,700, 40% for £37,701-125,140 and 45% for above £125,140
Saving allowances are £1K & £500 for basic & high tax payer respectively and in addition, 0% starting rate for interest where non-saving is less than £5K.
Dividend allowance is £1K, tax rates are 8.75%, 33.75% & 39.35% for basic, high & additional tax payer respectively.
Income tax reducer:
You can reduce your income tax by investing:
If you invest in EIS (Enterprise Investment Scheme) & VCT (Venture Capital Trust) you can claim Income tax relief of 30% on a maximum investment of £1m & £200K respectively, for SEIS (Seed Enterprise Investment Scheme) tax relief is 50% on maximum £200K.
Tax relief for Gift Aid & Pension contributions
If you are a basic rate tax payer and make personal pension contributions of £1k, then HMRC will give £250 to your pension scheme.
If you are a 40% or 45% tax rate payer you will get additional tax relief of 20% or 25% as your basic rate band will be increased by the gross amount of Gift Aid or personal pension contributions.
The maximum pension contribution eligible for tax relief is the higher of your relevant earnings or £3,600.
Relevant earnings are employment income, Trading income, Furnished holiday letting & patent income. Dividend and property income are not relevant earnings.
You can contribute a maximum Annual Pension Allowance of up to £60K or 10K for a higher earner who has ‘threshold income’ (net income less gross amount of personal pension contributions) over £200,000 and ‘adjusted income’ (net income plus occupational pension contribution by employee and employer) over £260,000. Any excess is charged to income tax at your marginal rate. You can claim unused allowance of 3 previous years.
Self-Assessment:
You need to notify HMRC within 6 months from the end of tax year on chargeability of income tax/capital gains tax by 5 October following the tax year and failure to do so will incur you a penalty according to your behaviour.
Online Tax returns/payment are due by 31st of January following the end of the tax year.
Penalty for late tax returns:
For 1 day late: £100, for 3 months late: £10/day for 90 days, for 6 months late: higher of 5% of liability or £300 and for 12 months late: additional higher of 5% of liability or £300.
National Insurance 23/24
Class 2 Self-employed earnings — flat rate £3.45 per week
(Small Profits Threshold per year is £6,725 which is NIC 2 exemption but it’s better to pay for NIC 2 for State pension qualifying years )
Class 3 Voluntary — flat rate £17.45 per week
Class 4 Self-employed — 9% of profits between £12,570 and £50,270, 2% of profits over £50,270
Employment allowance per employer, per year is £5,000.
Qualifying years for State pension if you’re working
When you’re working you pay National Insurance and get a qualifying year if:
- you’re employed and earning over £242 a week from one employer or
- you’re self-employed and paying National Insurance contributions
Qualifying years for State pension:
To get the full State Pension, in general you need to have paid National Insurance Contributions for 35 years.
You can fill the gap years up to 6 past years in general but you can do all the way back to 2006 by 5 April 2025
To be qualifying years, over £242 a week from one employer or self –employed and paying NIC or claim Child Benefit, Jobseeker’s Allowance or Employment and Support Allowance, Carer’s Allowance or Tax credit claim.