Income Tax Bands
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The first £11,850 you earn is tax free, the UK Gov call this you 'Personal Allowance'. After this, tax is appiled in bands and increases as you earn more. Here's the deal:
|Your Income||Band Name||Tax Rate|
|Up to £11,850||Personal Allowance*||0%|
|£11,851 to £46,350||Basic rate||20%|
|£46,351 to £150,000||Higher rate||40%|
|Over £150,000||Additional rate||45%|
*If you earn over £123,000 a year you don't get a Personal Allowance and all your income is taxed starting at the 20% band.
Gimme an example
If you earn £50,000 a year you will pay nothing on first £11,850, 20% on the next £34,500 (£46,350 - £11,850) and 40% on the remaining amount of £3,650 (£50,000 - £46,350). The total income tax paid is £8,360.
Income can be any money you 'earn' and you may have other income streams besides your salary. The government look at all your earnings when calculating income tax. But, other types of income also come with a tax free allowance. Here's a list of other income streams and the allowances.
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