How much Income Tax you pay in each tax year depends on:
- how much of your income is above your Personal Allowance
- how much of this falls within each tax band
Some income is tax-free.
The current tax year runs from 6 April 2014 to 5 April 2015. There will be new tax allowances and bands after this.
Your tax-free Personal Allowance
The standard Personal Allowance is £10,000, which is an amount of income you don’t have to pay tax on.
Income Tax rates
|Tax rate||Taxable income above your Personal Allowance|
|Basic rate 20%||£0 to £31,865
People with the standard Personal Allowance start paying this rate on income over £10,000
|Higher rate 40%||£31,866 to £150,000
People with the standard Personal Allowance start paying this rate on income over £41,866
|Additional rate 45%||Over £150,000|
Example You have £35,000 of taxable income and your Personal Allowance is £10,000. You pay basic rate tax at 20% on £25,000 (£35,000 minus £10,000).
Income Tax on savings and dividends
Savings interest is automatically taxed at 20%. If you’re on a low income, you may be able to get tax-free interest or half of the tax repaid. Higher or additional rate taxpayers will need to pay more tax.
If you own shares in a company and you’re a higher or additional rate taxpayer, you have to pay extra tax on dividends.
Paying less Income Tax
You may be able to claim Income Tax reliefs if you’re eligible for them.
If you’re married or in a civil partnership
You may be able to claim the new Marriage Allowance to reduce your partner’s tax if your income is less than the standard Personal Allowance.
If you don’t claim the Marriage Allowance and you or your partner was born before 6 April 1935, you may be able to claim Married Couple’s Allowance.