It's said there's nothing as certain as death and taxes. Yet while there's no doubt we'll all be taxed, the rates can change rapidly.
This is an updated guide for the tax year starting 6 April 2011 to be used in conjunction with the Income Tax Checker tool.
In this guide
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To check what your take-home pay should be, including pension contributions and Student Loan repayments, use the free Income Tax Checker.
What's my Personal Allowance?
Each of us has a 'personal allowance', which denotes the amount we can earn without paying any Income Tax. If you earn more than your personal allowance, then you pay tax at the applicable rate on all earnings above the personal allowance, but the allowance remain untaxed.
Your specific personal allowance depends on your age and, in some cases, your salary.
Age Band |
Earning bracket | 2011/12 Personal Allowance |
|---|---|---|
| Under 65 | Under £100,000 | £7,475 |
| £100,000 to £114,950 | Decreases from £7,475 by £1 for every £2 you earn, until it
reaches £0 | |
Over £114,950 |
£0 | |
65 - 74, inclusive
| Under £24,000 |
£9,940 |
| £24,000 and £28,930 | Decreases from £9,940, by £1 for every £2 you earn, until it
reaches £7,475 | |
| £28,930 and £100,000 | £7,475 | |
| £100,000 to £114,950 | Decreases from £7,475, by £1 for every £2 you earn, until it reaches £0 | |
| Over £114,950 | £0 | |
Over 74 |
Under £24,000 | £10,090 |
| £24,000 to £29,230 | Decreases from £10,090, by £1 for every £2 you earn, until it
reaches £7,475 | |
| £29,230 to £100,000 | £7,475 | |
£100,000 to £114,950 |
Decreases from £7,475, by £1 for every £2 you earn, until it
reaches £0 | |
| Over £114,950 | £0 | |
Extra Allowances | ||
Are you Blind? | Your personal allowance + £1,980 | |
If you are married, and one partner is over 75 during the 2011/12 tax year, then you get an extra Married Couples' Allowance. 10% of this allowance is then subtracted from your annual income tax.
If you were married before 5 December 2005, it is automatically worked out using the husband's salary. For couples married on or after December 2005, it uses the highest earners salary.
Salary |
2011/12 Married Couples' Allowance |
|---|---|
Under
£29,230 |
£7,295 |
Between £29,230 and £37,820 |
Decreases from £7,295, by £1 for every £2 you earn until it reaches £2,800 |
Over £37,820 |
£2,800 |
What Income Tax rate will I pay?
Once you know your personal allowance, anything extra earned will be subject to income tax. For the 2011/12 tax year, there are three marginal bands, including the 50% 'additional rate' tax (plus remember your personal allowance starts to shrink once earnings hit £100,000).
| Earnings |
2011/12 rate |
|---|---|
| Under your personal allowance (PA) For most, £7,475 |
No income tax payable |
| Between 'PA' and 'PA + £35,000' For most, £7,475 to £42,475 |
20% |
| Between 'PA + £35,000' and £150,000 For most, £42,475 to £150,000 |
40% |
| Over £150,000 | 50% |
Marginal bands mean that you only pay the specified tax rate on that portion of salary. For instance, if your salary puts you in the 40% tax band (ie. it is over 'Personal Allowance + £35,000'), then you only pay 40% tax on the segment of earnings in that band. For the lower part of your earnings, you'll still pay the appropriate 20% or 0%.
What's National Insurance?
In addition to plain old income tax, most UK workers also have 'National Insurance Contributions' deducted from their pay. These kick in based on your earnings from the age of 16, and you stop paying when you reach state retirement age.
Earnings | National Insurance Rate 2011/12 (For employed, NOT self-employed) | |
|---|---|---|
Per week | Annual Salary |
|
Under £139 | Under £7,225 | No National Insurance Payable |
£139 - £817 | £7,225 - £42,475 | 12% on everything earned between £139-£817/week |
Over £817 | Over £42,475 | 12% on everything earned between £139-£817/week, 2% on everything above that |
| Some advanced National Insurance rules, particularly for the self-employed, are very complicated. See the HMRC website for full rates | ||
Capital Gains Tax
Capital Gains is the least common tax on income, and for many it won't apply. However, if you sell or give away an 'asset' worth more than £6,000, you could have to pay CGT. It doesn't apply for main homes, cars or lottery/pools winnings, amongst other things.
Each year, individuals have an Annual Exemption Amount that allows them to receive some gains tax-free. Above this, you pay a flat rate of Capital Gains Tax on all gains
Annual Exemption Amount | £10,600 for individuals |
|---|---|
Capital Gains Tax Rate | 18% |
Paying into a pension?
Pension payments get very complex indeed, yet the basic thing to remember is that most people don't have to pay tax on money they pay into their pension via their employer's PAYE system. Instead the tax relief is used to topup your pension contributions.
If you aren't a taxpayer, then you will get given an extra £20 for every £80 you pay into a pension, until your total contributions reach £3,600.
However, there are some limits on the amount of tax-free contributions you can make (both in a year and over your lifetime) which we've listed below.
Annual Tax-free contribution limit |
£50,000 |
|---|---|
Lifetime Tax-free allowance |
£1,500,000 |
To check what your take-home pay should be, including pension contributions and Student Loan repayments, use the free Income Tax Checker
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