Understanding PAYE Tax and National Insurance for 2024-2025
Navigate New Tax Rates and Deductions with Confidence
Stay informed on the latest PAYE tax rates and thresholds to ensure compliance and optimal financial planning for your business.
PAYE Operation
Essential insights into operating your payroll under the new tax regulations.
Software Solutions
Discover how updated payroll software can streamline your tax deductions.
The Importance of PAYE
Why Proper PAYE Management Matters
For employers, managing PAYE tax and Class 1 National Insurance contributions is crucial. Not only does it ensure compliance with HMRC regulations, but it also affects the financial well-being of both the company and its employees. Effective payroll management, facilitated by robust payroll software, is key to calculating and deducting the correct amounts from employee wages. This not only helps in maintaining accurate financial records but also in building trust and reliability between employers and employees.
2024-2025 Tax Rates
Detailed Overview of PAYE Tax Thresholds and Rates
Understanding Emergency Tax Codes
The amount of Income Tax you deduct from your employees depends on their tax code and how much of their taxable income is above their Personal Allowance.
Emergency tax codes are temporary measures used by HMRC to ensure the correct tax is collected when there is insufficient information about an employee’s tax details. For the 2024 tax year, the emergency tax codes are 1257L W1, 1257L M1, and 1257L X. These codes are applied when details such as a new employee’s previous income are unclear, or when a P45 form is not available. The ‘1257L’ indicates a tax-free personal allowance of £12,570, applicable across different pay periods: weekly (W1), monthly (M1), and emergency (X).
England and Northern Ireland
The standard employee personal allowance for the 2024 to 2025 tax year is:
• £242 per week
• £1,048 per month
• £12,570 per year
PAYE
• Basic tax rate
• Higher tax rate
• Additional tax rate
Rate of tax
20%
40%
45%
Annual earnings the rate applies to (above the PAYE threshold)
• Up to £37,700
• From £37,701 to £125,140
• Above £125,140
Scotland
• £242 per week
• £1,048 per month
• £12,570 per year
PAYE
• Starter tax rate
• Basic tax rate
• Intermediate tax rate
• Higher tax rate
• Additional tax rate
• Top tax rate
Rate of tax
19%
20%
21%
42%
45%
48%
Annual earnings the rate applies to (above the PAYE threshold)
• Up to £2,306
• From £2,307 to £13,991
• From £13,992 to £31,092
• From £31,093 to £62,430
• From £62,431 to £125,140
• Above £125,140
Wales
The standard employee personal allowance for the 2024 to 2025 tax year is:
• £242 per week
• £1,048 per month
• £12,570 per year
PAYE
• Basic tax rate
• Higher tax rate
• Additional tax rate
Rate of tax
20%
40%
45%
Annual earnings the rate applies to (above the PAYE threshold)
• Up to £37,700
• From £37,701 to £125,140
• Above £125,140
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