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Income Tax Rates and Allowances

Income tax is a tax on income (earning). Not all income is taxable and you’re only taxed on ‘taxable income’ above a certain levels. Even then, there are other reliefs and allowances that can reduce your income tax bill – and in some cases mean you’ve no tax to pay.

Income Tax Rates Table

Income Tax Rates 2013/14 2014/2015
Starting rate of 10% on savings income up to* £2,790 £2,880
Basic rate of 20% on income up to £32,010 £31,865
Higher rate of 40% on income £32,011– £31,866–
£150,000 £150,000
Tax on first £150,000 £53,598 £53,627
Additional rate on income over £150,000 45% 45%
Dividends for:
Basic rate taxpayers 10% 10%
Higher rate taxpayers 32.5% 32.5%
Additional rate taxpayers 37.5% 37.5%

*Not available if taxable non-savings income exceeds the starting rate band.

Income Tax Allowances

Main income tax allowances 2013/14 2014/2015
Personal allowance £9,440 £10,000
Personal allowance reduced by 50% if total income exceeds £100,000 £100,000
Personal if born between 6/4/38 and 5/4/48 £10,500 £10,500
Personal if born before 6/4/38 £10,660 £10,660
Personal if born before 6/4/48 reduced by 50% if income exceeds £26,100 £27,000
Married couples/civil partners (minimum) at 10%* £3,040 £3,140
Married couples/civil partners (maximum) at 10%* £7,915 £8,165
Blind person’s allowance £2,160 £2,230

*Where at least one spouse/civil partner was born before 6 April 1935.

What counts as taxable income?

Earning that count towards taxable income are:

  • Earnings from employment
  • Earnings from self-employment
  • Pension income
  • Interest on savings
  • Income from shares/dividends
  • rental income

What are tax free allowances?

Nearly everyone who is resident in the UK for tax purposes receives a Personal Allowance, which is an amount of taxable income you’re allowed to earn or receive each year tax-free.
This tax year (2013-14) the basic Personal Allowance – or tax-free amount – is £9,440. You may be entitled to a higher Personal Allowance if you were born before 6 April 1948.

Tax Allowances for company directors or employees?

If you’re an employee or director you might be able to get tax relief for business expenses you’ve paid for.

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