Income Tax Rates

In the UK, income tax is a tax you pay on your income, which is collected by HM Revenue & Customs (HMRC). It applies to earnings from work, savings, investments, and other sources of income.

The UK income tax system is progressive, meaning higher earners pay a higher percentage of tax. The rates depend on how much you earn in a year, and income is divided into tax bands.

You pay tax on things like:

• money you earn from employment

• profits you make if you’re self-employed, including from services you sell through websites or apps - you can check if you need to tell HMRC about this income

• some state benefits

• most pensions, including state pensions, company and personal pensions and retirement annuities

• rental income (unless you’re a live-in landlord and get less than the Rent a Room Scheme limit)

• benefits you get from your job

• income from a trust

• interest on savings over your savings allowance

You do not pay tax on things like:

• the first £1,000 of income from self-employment - this is your ‘trading allowance’

• the first £1,000 of income from property you rent (unless you’re using the Rent a Room Scheme)

• income from tax-exempt accounts, like Individual Savings Accounts (ISAs) and National Savings Certificates

• dividends from company shares under your dividends allowance

• some state benefits

• premium bond or National Lottery wins

• rent you get from a lodger in your house that’s below the Rent a Room Scheme limit

Personal Allowance:

• Most people are entitled to a personal allowance of £12,570 in the 2024/25 tax year. This is the amount of income you can earn before you start paying income tax.

• For higher earners (those earning above £100,000), the personal allowance is reduced by £1 for every £2 you earn over £100,000, and it is eliminated entirely at £125,140.