Income Tax applies to earnings, pensions, savings, dividends and more, with different bands across the UK nations.
Individuals can be liable to Income Tax at any age. There are special rules to stop parents avoiding tax by putting assets into their children’s names.
The tables below shows the tax rates you pay in each band if you have a standard Personal Allowance of £12,570.
| Bands: England, Northern Ireland and Wales | ||
| 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% |
| Bands: Scotland | ||
| Band | Taxable income | Tax rate |
| Personal Allowance | Up to £12,570 | 0% |
| Starter rate | £12,571 to £15,397 | 19% |
| Basic rate | £15,398 to £27,491 | 20% |
| Higher rate | £43,663 to £75,000 | 42% |
| Advanced rate | £75,001 to £125,140 | 45% |
| Top rate | over £125,140 | 48% |
If you earn over £100,000 in any tax year your personal allowance is gradually reduced by £1 for every £2 of adjusted net income over £100,000 irrespective of age. This means that any taxable receipt that takes your income over £100,000 will result in a reduction in personal tax allowances. This means your personal Income Tax allowance would be reduced to zero if your adjusted net income is £125,140 or above.
For the current tax year if your adjusted net income is likely to fall between £100,000 and £125,140 you would pay an effective marginal rate of tax of 60% as your £12,570 tax-free personal allowance is gradually withdrawn.
If your income sits within this band you should consider what financial planning opportunities are available in order to avoid this personal allowance trap by trying to reduce your income below to £100,000.
