How much income tax you pay is calculated by various rates set by the government. The rates are set in bands according to how much you earn per year. You are also granted an amount of tax free income called your personal allowance.
Tax bands for 2009-2010These tax bands are as follows:
- Earnings from savings interest up to £2,440 per annum are taxed at 10% (Basic Rate)**
- Earnings up to £37,400 per annum are taxed at 20% (Basic Rate)
- Earnings over £37,400 per annum are taxed at 40% (Higher Rate)
** If you're a higher rate taxpayer you must let your Tax Office know what interest you have received so that they can collect the extra tax due.
Tax bands for 2010-2011
The tax bands for year ending April 2011 are the same as the current year with the exception of a new band for income over £150,000 that will attract a rate of 50%.
Income Tax Personal Allowances for 2009-2010
Your personal allowance is the amount you are permitted to earn without paying income tax. The income tax rate bands will change for the tax year ending April 5 2010. Personal allowances will be reduced for income over £100,000 from April 2010, and this will be reduced at a rate of £1 in every £2 over £100,000, going down to Zero.
Taxable benefits in kind
IMPORTANT: Note that your personal allowance will be reduced if you have taxable benefits from your employment. These benefits in kind are only taxable if you are earning more than £8,500 per annum (2009/10). Taxable benefits will effect your tax code and reduce your calculated pay accordingly. If you stop receiving a benefit you must inform your tax office to ensure your tax code is changed so that you do not pay too much tax. If this is not done, you can still reclaim any over payment of tax from previous years. Current year refunds should happen automatically by adjusting your income tax as soon as the new tax code is applied.
Personal Allowances / Married Couples Allowances
There has been an increase in peoples allowances for 2009/10. Here are the personal allowances for 2008/09 and 2009/2010 including married couples, blind allowances and age related allowances.
Company Car Tax
If you have a Company Car, use the Company Car Tax Calculator to see how this will effect you.
More about Income Tax
Read more information on Income Tax Rates.