Payroll 2024/25 – Rates, allowances and thresholds from 6th April 2024.

With the new tax year 24/25 almost upon us, HM Revenue and Customs (HMRC) has now published the GOV.UK guidance on the rates and thresholds for employers 2024 to 2025.

We summarise the main changes here, but more details can be found by following the GOV.UK link below.

You must be school leaving age, see the government guide lines on school leaving age, to get the National Minimum wage and aged 23 or over to get the National Living Wage. The government website will help you work out minimum wages for different types of work if your employees are not paid by the hour.

There is also the Real Living Wage, and Living London wage, find out more here

– Lower earnings Limit (LEL): £123 per week, £533 per month and £6,396 per year

– Primary Threshold (PT): £242 per week, £1,048 per month and £12,570 per year

– Secondary Threshold (ST): £175 per week, £758 per month and £9,100 per year

– Upper Earnings Limit (UEL): £967 per week, £4,189 per month and £50,270 per year

– Employee’s earnings above PT up to and including UEL: 8%

– Employee’s earnings above UEL: 2%

– Employer’s earnings above ST: 13.8%

– UK basic tax rate: 20% on annual earnings above the PAYE tax threshold and up to £37,700

– UK higher tax rate: 40% on annual earnings from £37,701 to £125,140

– UK additional tax rate: 45% on earnings above £125,140

– Statutory Maternity Pay first 6 weeks 90% of the employee’s average weekly earnings from their qualifying period, then 33 weeks at £184.03 or 90% of average weekly earnings whichever is lower.

– Statutory Paternity Pay £184.03 or 90% of average weekly wage if lower.

– Statutory Sick pay £116.75 per week

Pension % remain at a minimum 5% Employee’s contribution and a 3% Employer’s.

More guidance can be found from GOV.UK here.

Employment allowance and your maximum tax-free salary for 2024-2025

There is no change to the personal allowance which remains at £12,570, and the current tax code will remain at 1257L.

The Employment Allowance will remain at £5,000 – however remember that this is not available to companies with just one Director on the payroll, or to companies whose National Insurance Contributions exceeded £100,000 during the 2023/2024 tax year.

The Employment Allowance is a potential £5,000 reduction in Employers NI Liability. This could help you in deciding how much salary to pay yourself or your spouse in the next tax year.

For businesses eligible for Employment Allowance, presuming you have no other income we can increase your salary to your personal tax-free allowance for 2024/2025, i.e. £12,570 per annum, which is £1,047.50 per month.

This will trigger an National Insurance bill for your company of £478.86 per annum respectively.  However, this will be reduced to nil by the Employment Allowance that can be claimed.

The extra salary over and above the NI threshold should produce corporation tax relief of at least £661.20 per annum.

For the tax year April 2024 to March 2025 you will be able to draw £758.00 per month without attracting any tax or NI.  This amount will generate a year’s pension credit at zero cost to you – to achieve a full state pension, you must have 35 years’ worth of credits.

Full corporation tax relief starting at 19% should be available in your company for this payroll cost.

This relief is only available for 12 consecutive months from the veteran’s first day of civilian employment and entitles the employer exemption from paying national insurance up to the upper secondary level.

The relief is available to all employers of veterans regardless of when the veteran left the regular armed forces, providing they have not previously been employed in a civilian capacity.

Dux Advisory Payroll

With payroll legislation becoming more complex and constantly changing – are you 100% sure your payroll is correct? Are you worried you’ve made mistakes? Does the thought of incurring penalties that you can’t afford worry you?

If you are struggling to keep up with the changes to PAYE, Employment Allowance and the National Insurance contributions please get in touch.

Outsourcing your payroll to us means that you can be confident that you’ve got payroll matters covered.

Our payroll service uses the latest software so that we can offer an efficient and secure service, leaving you to focus on doing what you do best – running your business!

You can also read more about our payroll and other outsourcing services here.