UK Income Tax Information

It is always surprising, given that tax is something unavoidable when you work, how few people have a grasp of the figures and the bands and how much income tax they will have to pay on their earnings.

The whole concept is relatively simple but there are many myths that abound, for instance that when your salary is a few pounds above a threshold you actually earn less than you would if you had a salary of a few pounds less. This is not true because the tax bands are tiered, meaning that they only apply to salary above a threshold rather than the whole amount, and therefore this situation cannot arise!

How do you work out the deductions on your UK salary for income tax then? These figures are based on the latest rates at time of writing (Jan 2011). This information applies to people under 65 with no special allowances. For information on allowances, please read the Income Tax Allowances information page.

You are given a personal tax allowance of £6,475. This means that the first £6,475 you earn will not be eligible for payment of income tax. After that, there is then another £2,440 at which income tax comes out at the rate of 10%.

Most people comfortably reach above that income level in the course of a year, and income between £2,240 and £37,400 comes out at 22% - a much higher rate, and this is what people therefore tend to pay on the majority of their pay.

For those who are high earners and reach above earnings of the allowance and £37,400 then there is tax to be paid at the rate of 40% - again a much higher rate. Therefore you may find that when you earn above that threshold, you don't realise it too much as most of it is going in tax! There is currently an additional rate of 50% tax for earninsg over £150,000 so that won't trouble too many of us at least.

Please note: tax information changes on a not infrequent basis. For full details and up-to-date information we suggest you take a look at