Test BDL Scot tax FS

This fact sheet tells you about the current tax rates and allowances.

Use this fact sheet to find out about:

• personal allowances for income tax;
• income tax rates and bands;
• National Insurance contributions for sole traders and partners in a business partnership;
• National Insurance contributions for directors of limited companies and employees;
• corporation tax; and
• value added tax (VAT).

Income tax allowances

Personal allowances	2023/24	2024/25
Personal allowance (1)	£12,570	£12,570
Income limit for personal allowance (2)	£100,000	£100,000
Income limit for married couple's allowance (3)	£34,600	£37,000
Married couple's allowance (maximum amount) (4)	£10,375	£11,080
Married couple's allowance (minimum amount) (5)	£4,010	£4,280
Blind person's allowance	£2,870	£3,070

Notes

(1) and (2) Since 2016/17 everyone is entitled to the same Personal allowance and income limit, no matter when they were born.

(3) Where income is above this figure, the allowance is reduced by £1 for every £2 above the limit.

(4) and (5) The relief for Married couple's allowance is given at 10%.

Income tax rates and bands

	2023/24	2024/25
Scottish starter rate 19%	Up to £2,162	Up to £2,306
Scottish basic rate 20%	Above £2,162 up to £13,118	Above £2,306 up to £13,991
Scottish intermediate rate 21%	Above £13,118 up to £31,092	Above £13,991 up to £31,092
Scottish higher rate 42% (for 2022/23 this was set at 41%)	Above £31,092 up to £125,140	Above £31,092 and up to £62,430
Scottish advanced rate 45% (Introduced from 2024/25)	-	Above £62,430 up to £125,140
Scottish top rate 48% (for 2023/24 this was set at 47%)	Above £125,140	Above £125,140

• Income tax is paid on the amount of taxable income remaining after you have deducted any allowances you are entitled to, such as the Personal allowance and Blind person’s allowance.

• Your personal allowance goes down by £1 for every £2 that your adjusted net income is above £100,000. This means your allowance is zero if your income is £125,140 or above for tax years 2023/24 and 2024/25.

• Since 6 April 2017 the bands and rates for Scottish Income Tax have been set by the Scottish Government. These differ from those set in England and Wales.

• From 2018/19 the Scottish Government introduced the Scottish starter rate and Scottish intermediate rate.

• From 2024/25 the Scottish Government introduced the Scottish advanced rate.

• Tax relief for finance costs for individual landlords of residential properties is fully restricted to the basic rate only. For more information about the changes which were phased in from 2017/18, see HM Revenue & Customs guidance on Tax relief for residential landlords: how it's worked out.

National Insurance contributions class 2 and class 4

	2023/24	2024/25
Class 2 (6)	£3.45pw	-
Class 2 - Small profits threshold	£6,725pa	£6,725pa
Class 2 - Lower profits threshold (7)	£12,570pa	-
Class 4 - Lower profits limit	£12,570pa	£12,570pa
Class 4 - Upper profits limit	£50,270pa	£50,270pa
Class 4 - Rate between upper and lower profits limit	9%	6%
Class 4 - Rate above upper profits limit	2%	2%

Notes

(6) From 2024/25 self-employed individuals no longer have to pay Class 2 National Insurance contributions. Although, self-employed individuals with profits below the Small profits threshold can make voluntary contributions.

(7) For 2023/24 self-employed individuals did not pay Class 2 National Insurance contributions if their profits were between the Small profits threshold and the Lower profits threshold, but continued to build up National Insurance credits. For more information, see GOV.UK.

Example calculations

• If you are under retirement age and either a sole trader or a partner in a partnership, the following examples will help you work out an estimate of the monthly income tax and National Insurance you should pay on your profit from your business.

• You will then be able to work out your Available drawings from your business. This will help you work out your household budget to show you what you have available to pay your creditors.

• In the following examples, the figure taken from the business budget sheet for Drawings (what your profit is before tax and National Insurance) is £4,250 per month.

• The example calculations should not be used for income from residential properties.

Estimated monthly income tax calculation for 2024/25

1.	Insert the monthly Available drawings figure from Your business and household budget sheet	£4,250	A
2.	Multiply Figure A by 12 to get your yearly drawings figure	£51,000	B
3.	Insert your Personal allowance for income tax figure	£12,570	C
4.	Take Figure C (your Personal allowance for income tax) away from Figure B (your yearly drawings) to work out what part of your drawings you pay tax on	£38,430	D
5.	Multiply the first £2,306 of Figure D by 19% to work out how much Scottish starter rate tax you need to pay	£438.14	E
6.	Multiply the next £11,685 of Figure D by 20% to work out how much Scottish basic rate tax you need to pay	£2,337	F
7.	Multiply the next £17,101 of Figure D by 21% to work out how much Scottish intermediate rate tax you need to pay	£3,591.21	G
8.	Take away £31,092 from Figure D and multiply the answer by 42% to work out how much Scottish higher rate tax you need to pay (you only need to do this step if Figure D is more than £31,092)	£3,081.96	H
9.	Add together Figure E, Figure F, Figure G and Figure H to get an estimate of your yearly tax liability	£9,448.31	I
10.	Divide Figure I by 12 to get an estimate of your monthly tax liability	£787.36	J

Use J £787.36 as the Estimated tax figure on Your business and household budget sheet.

Estimated Class 4 National Insurance contribution calculations for 2024/25

1.	Use Figure B from above (unless Figure B is more than the Upper profits limit of £50,270, then insert £50,270)	£50,270	I
2.	Figure I minus £12,570 (the Lower profits limit)	£37,700	J
3.	Figure J multiplied by 6% (the rate payable between the lower and upper limits)	£2,262	K
4.	Figure B from above minus £50,270 (if the answer is less than 0, insert 0)	£730	L
5.	Figure L multiplied by 2% (the rate payable above the Upper profits limit)	£14.60	M
6.	Add together Figure K and Figure M to get your estimated yearly amount of Class 4 contribution	£2,276.60	N
7.	Divide Figure N by 12 to get your estimated monthly Class 4 contribution	£189.72	O

Use O £189.72 as the National Insurance class 4 figure on Your business and household budget sheet.

National Insurance contributions class 1

Thresholds

	2023/24	2024/25
Lower earnings limit primary class 1	£123pw	£123pw
Upper earnings limit primary class 1	£967pw	£967pw
Primary threshold	£242pw	£242pw
Secondary threshold	£175pw	£175pw

Employee rates

	2023/24 (from 6 April 2023 to 5 January 2024)	2023/24 (from 6 January 2024 to 5 April 2024)	2024/25
Class 1 rate between primary threshold and upper earnings limit	12%	10%	8%
Class 1 rate above upper earnings limit	2%	2%	2%

Employer rates

	2023/24	2024/25
Secondary class 1 rate above second threshold	13.8%	13.8%
Class 1A rate on employer provided benefits	13.8%	13.8%

For information about National Insurance thresholds and rates that apply to special categories, such as for employers of qualifying veteran, freeport and apprentice employees, see GOV.UK.

Corporation tax

For non-ring fence profit

	2023/24	2024/25
Main rate (companies with profits over £250,000)	25%	255
Small profits rate (companies with profits under £50,000)	19%	19%
Marginal relief lower limit	£50,000	£50,000
Marginal relief upper limit	£250,000	£250,000
Marginal relief fraction	3/200	3/200

From 1 April 2023, there is no longer a single corporation tax rate for non-ring fence profits. If your company has taxable profits between £50,000 and £250,000, from 1 April 2023 you may be able to claim marginal relief to reduce your corporation tax rate from the 25% main rate. Use the GOV.UK calculator to work out how much marginal relief you can claim.

Value added tax (VAT)

	2023/24	2024/25
Standard rate	20%	20%
Reduced rate	5%	5%
Zero rate	0%	0%
Registration level	£85,000	£90,000
De-registration level	£83,000	£88,000

Making Tax Digital for VAT was introduced on 1 April 2019 for businesses with a taxable turnover above the VAT registration threshold. Since 1 April 2022, unless HMRC gives an exemption from doing so, all VAT registered businesses must be signed up to Making Tax Digital for VAT whatever their turnover. For more information, go to www.gov.uk.