Income Tax Rates UK and Present Year Tax Bands

Income Tax

Current income tax rates in the UK:

The term income tax refers to the type of tax levied on the income generated by businesses and individuals.

By law, the taxpayers should file an income tax annual return.  The government earns a major source of income from the tax.

The tax rate UK is broadly classified into four rates:

  • Basic rate tax
  • Higher tax rate
  • Additional rate tax
  • Personal saving allowance

Basic rate tax:

In England, Northern Ireland, and Wales, tax is payable up to the basic rate of 20 per cent of taxable income up to £50,000.

If it’s Scotland, the tax is payable at the basic rate of 20 per cent on the taxable income up to £24,944.

Higher tax rate:

In England, Wales, or Northern Ireland, you have a taxable income that is more than £50,000.

For the amount above £50,001 up to £150,000, you need to pay 40 per cent of the tax. If you live in Scotland for the amount above £43,431 up to £150000, you need to pay the higher rate of 41 per cent.

Additional rate tax:

Suppose you live in England, Northern Ireland, or Wales. If you have a taxable income of £150,001, you must pay 45 per cent. If you are living in Scotland, you need to pay 46 per cent.

Personal saving allowance:

Most people can earn some money from their savings without paying the tax. The basic rate taxpayer will earn up to £1000 in the savings tax-free.

Higher rate taxpayers will earn up to the £500. This is generally called the Personal Savings Allowance.

How does the personal allowance work?

Every Individual has a Personal allowance. This is the amount of money you can earn each tax year before paying the income tax.

Suppose you earn less than the Personal allowance allotted for that year. You don’t need to pay any amount for the income tax. For 2022- 2023, the personal allowance is £ 12,570.

Your presence allowance is more significant when you claim the Marriage Allowance or Blind person’s allowance.

If you earn over £1,00,000, the personal allowance of £12,570 will be reduced by the £1 and £2 earned over the £100,000. If you earn £1,25,000, you can pay income tax on everything, and there is no tax-free allowance.

Why are tax rates significant?

Paying tax is mandatory, and it is a major role for everyone who is receiving income from various sources.

Generally, the tax rate UK has many benefits. Some of the important benefits of paying the tax are listed below:

  • Knowing the tax bracket lets you know about the income tax you are paying and can help you with your financial budget.
  • When you start earning more, it’s possible to pay a higher tax rate which means you could pay more tax.
  • If you earn less there, you can increase your allowance and start paying less.
  • The tax rate plays a significant role in revenue for most governments.
  • The tax money is usually spent on improving and maintaining the public infrastructure, including roads and bridges.
  • The tax rate money is essential for public services such as schools, emergency services, and welfare programs.

What is the importance of paying taxes?

The taxpaying is the most important which some of them are listed below:

  • Loan Approval
  • Visa Application
  • Self-employed Individual
  • Government Projects
  • Carrying forward of loss

Loan Approval:

When you apply for a loan, mainly a home loan or a vehicle loan, all the banks will ask you for a copy of the income tax returns.

This can be your ITR for the last 2 to 3 years. The main benefits of having the ITR are getting a higher loan amount and reconsidering your loan if it gets rejected.

By having this, the bank calculates the ability to repay your loan based on income.

Visa Application:

During their visa interview, many foreign consulates should submit their previous year’s income tax rates. The income statement is compulsory in the UK, US, Europe, and Canada.

The income tax rate proves you’re not trying to leave your country to evade tax. Always try to carry the ITR copy while travelling abroad.

Self-employed Individual:

Consultants, entrepreneurs, and freelancers are usually not eligible, according to Form 16. If their annual income is higher than the basic exemption limit, the income tax rate will become proof of payment.

Government Projects:

The individual government department has no specific strict rules, but in some cases, the income tax rate receipt should be submitted during requisition for the government project.

The submission of the income tax rate will ensure sufficient income, and you can support the payment obligations.

Carrying forward of loss:

The short-term or long-term capital loss should be carried forward to adjust against the capital gain in the subsequent years.

The long-term capital loss of one year should be carried forward to the eight consecutive years that immediately succeed in the years in which direct loss occurred.

What are the UK tax brackets?

The tax band for the UK is generally classified into four bands are

  • Personal allowance in which the taxable income is £0 -£12,570 for a tax rate of 0%.
  • The basic rate in which the taxable income is £12,571 – £37,700 for the tax rate of 20%.
  • The higher rate in which the taxable income is £37,701 – £150000 for the tax rate is 40%.
  • The additional rate in which the taxable income is over £150,000 for the tax rate of 45%.

Income tax rates example:

The tax rate UK is a step-by-step process. Let’s take an example of the income tax rate calculations:

  • Your earnings are £33,000, and your allowance is £9,440.
  • Next step, you should deduct the personal allowance from the total earnings, which means £33,000 – £9,440 = £23,560.
  • You pay a 20% basic rate tax on the £23,560.

Tax rebates

The tax rebate is generally a refund on the taxes when the tax liability is less than the taxes that the Individual should pay.

The taxpayers usually get a refund on their income pay if they spend more than they earn.

Most often, clean the incoming tax refund as your income usually falls within the tax slab modified every year as per the direction of the government. The refund tax money is generally given at the end of the financial year.

How to get tax rebates in the UK?

One of the most popular sides of the tax rate UK system is the work expenses, tax relief, and allowance.

All the UK taxpayers equally claim tax relief on things they must buy for their work and business.

  • Pay from the previous or the current job.
  • Pension from your income.
  • Foreign income.
  • Pension Payment.
  • Interest from the savings.


For centuries taxes have played an important fact in national life. Without the payable tax system, it is impossible to pay the many important purposes like the country’s defence services, health, welfare, schools, universities, social services, and transport systems.

Usually, your income tax will be calculated using your income. The more you earn, the more income tax band is designed to pay a higher amount of income tax. Income tax bands are designed to make a tax payable as fair as possible for everyone.

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