Income Tax bands (England and NI)

The amount of Income Tax you pay in each tax year when you’re self-employed (ie a sole trader) is determined by how much income you earn above the Personal Allowance threshold and how much of your income falls within the income tax bands detailed below.

The Personal Allowance is the amount of income a person can earn before they need to pay Income Tax. So, because of the Personal Allowance, some income is tax-free.

Income tax rates and bands for the 2024/25 tax year

Band	Taxable income	Tax rate
Personal Allowance	Up to £12,570	0%
Basic rate	£12,571 to £50,270	20%
Higher rate	£50,271 to £125,140	40%
Additional rate	Over £125,140	45%

Income limit for Personal Allowance = £125,140

Income tax rates and bands for the 2023/24 tax year

Band	Taxable income	Tax rate
Personal Allowance	Up to £12,570	0%
Basic rate	£12,571 to £50,270	20%
Higher rate	£50,271 to £125,140	40%
Additional rate	Over £125,140	45%

Income limit for Personal Allowance = £125,140

Income tax rates and bands for the 2022/23 tax year

Band	Taxable income	Tax rate
Personal Allowance	Up to £12,570	0%
Basic rate	£12,571 to £50,270	20%
Higher rate	£50,271 to £150,000	40%
Additional rate	More than £150,000+	45%

Income limit for Personal Allowance = £100,000

The Income Tax bands for Wales and Scotland are different.

Income tax rates and bands for the 2021/22 tax year

Band	Taxable income	Tax rate
Personal Allowance	Up to £12,570	0%
Basic rate	£12,571 to £50,270	20%
Higher rate	£50,271 to £150,000	40%
Additional rate	More than £150,000+	45%

Income limit for Personal Allowance = £100,000

The Income Tax bands for Wales and Scotland are different.

Income tax rates and bands for the 2020/21 tax year

Band	Taxable income	Tax rate
Personal Allowance	Up to £12,500	0%*
Basic rate	£12,501 to £37,500	20%
Higher rate	£37,501 to £150,000	40%
Additional rate	More than £150,000	45%

Income limit for Personal Allowance = £100,000

The Income Tax bands for Wales and Scotland are different.

Income tax rates and bands for the 2019/20 tax year

Band	Taxable income	Tax rate
Personal Allowance	Up to £12,500	0%*
Basic rate	£12,501 to £37,500	20%
Higher rate	£37,501 to £150,000	40%
Additional rate	More than £150,000	45%

Income limit for Personal Allowance = £100,000

The Income Tax bands for Wales and Scotland are different.

Income tax rates and bands for the 2018/19 tax year

Band	Taxable income	Tax rate
Personal Allowance	Up to £11,850	0%
Basic rate	£11,851-£34,500	20%
Higher rate	£34,501 to £150,000	40%
Additional rate	More than £150,000	45%

Income limit for Personal Allowance = £100,000

The Income Tax bands for Wales and Scotland are different.

Income tax rates and bands for the 2017/18 tax year

Band	Taxable income	Tax rate
Personal Allowance	Up to £11,500	0%
Basic rate	£11,501 to £45,000	20%
Higher rate	£45,001 to £150,000	40%
Additional rate	More than £150,000	45%

Income limit for Personal Allowance = £100,000

The Income Tax bands for Wales and Scotland are different.

National Insurance contributions

National Insurance contributions (NICs) can be payable by employees and self-employed people. NICs pay for state benefits, such as state pension, statutory sick pay or maternity leave, as well as entitlement to additional unemployment benefits where relevant. 

Many self-employed people (i.e sole traders) pay two types of National Insurance contributions – Class 2s and Class 4s – which is determined by how much profit they make. NICs are not payable until profit thresholds are reached. 

Class 2

	2024/25	2023/24	2022/23	2021/22	2020/21	2019/20	2018/19
Small Profits Threshold (per year)	£6,725	£6,725	£6,725	£6,515	£6,475	£6,365	£6,205
Rate per week	£3.45	£3.45	£3.15	£3.05	£3.05	£3.00	£2.95

From the 6 April 2024 self employed National Insurance (Class 4 NICs) is being cut by 3% from 9% to 6% on profits that exceed £12,570 up to £50,270, whilst the upper profits rate is being kept at 2%. 

• From 6 April 2024, self-employed people with profits above £12,570 will no longer be required to pay Class 2 NICs, but will continue to receive access to contributory benefits including the State Pension. 
• This is a tax simplification that effectively abolishes Class 2 NICs by removing the requirement for self-employed people to pay. 
• Those with profits between £6,725 and £12,570 will continue to get access to contributory benefits including the State Pension through a National Insurance credit without paying NICs, as they do currently. 
• Those with profits under £6,725 and others who pay Class 2 NICs voluntarily to get access to contributory benefits including the State Pension, will continue to be able to do so. The weekly rate they pay will be frozen at £3.45 for 2024-25.

Class 4

	2024/25	2023/24	2022/23	2021/22	2020/21	2019/20	2018/19
Lower Profits Limit (after which Self-employed people start paying Class 4 NICs)	£12,570	£12,570	£11,908	£9,568	£9,500	£8,632	£8,424
Upper Profits Limit (after which the self-employed pay a lower rate)	£50,270	£50,270	£50,270	£50,270	£50,000	£50,000	£46,350
Rate between Lower Profits Limit and Upper Profits Limit	6%	9%	10.25%	9%	9%	9%	9%
Rate above Upper Profits Limit	2%	2%	3.25%	2%	2%	2%	2%

Dividend allowance

If you own shares in a company, you can receive dividend payments. Dividend payments can be monthly or every couple of months if you set up a limited company and pay yourself via salary and dividend payment (which can be more a more tax-efficient way to pay yourself).

You do not pay tax on any dividend income that falls within your Personal Allowance, which is the amount of income that you can earn each year without paying tax. Each year, you also get a dividend allowance and you only pay tax on any dividend income above that dividend allowance. The dividend allowance is detailed below.

Tax year	Dividend allowance
6 April 2024 to 5 April 2025	£500
6 April 2023 to 5 April 2024	£1,000
6 April 2022 to 5 April 2023	£2,000
6 April 2021 to 5 April 2022	£2,000
6 April 2020 to 5 April 2021	£2,000
6 April 2019 to 5 April 2020	£2,000
6 April 2018 to 5 April 2019	£2,000
6 April 2017 to 5 April 2018	£5,000

Paying tax on dividends

The amount of tax you pay on dividends you receive that are above the dividend allowance depends on your Income Tax band.

For 2024/25 you will be taxed as follows:

Tax band	Tax rate on dividends above the allowance
Basic rate	8.75%
Higher rate	33.75%
Additional rate	39.35%

For 2023/24 you will be taxed as follows:

Tax band	Tax rate on dividends above the allowance
Basic rate	8.75%
Higher rate	33.75%
Additional rate	39.35%

For 2022/23 you will be taxed as follows:

Tax band	Tax rate on dividends above the allowance
Basic rate	8.75%
Higher rate	33.75%
Additional rate	39.35%

For 2021/22 you will be taxed as follows:

Tax band	Tax rate on dividends above the allowance
Basic rate	7.5%
Higher rate	32.5%
Additional rate	38.1%

Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.