Income tax is charged at different rates based on the level of your income.
Generally, everyone is entitled to a tax-free personal allowance – where no income tax is charged – of £11,850 for the current 2018/19 tax year. If your income exceeds £100,000, the personal allowance is proportionately reduced to nil.
Basic, higher and additional rates
If your income exceeds the personal allowance, you will be taxed either a basic, higher or additional rate depending on taxable income thresholds. Taxable income thresholds change each tax year.
Income tax is charged at the basic rate – 20 per cent up to a threshold of £34,500 for the 2018/19 tax year.
Taxable income between £34,501 and £150,000 is charged at the higher rate of 40 per cent.
Income that exceeds £150,000 is charged at the additional rate of 45 per cent.
The starting tax rate of 0 per cent on savings income, eg bank interest up to £5,000, applies for the 2018/19 tax year.
You also pay National Insurance contributions on your income. This is charged at different rates according to your level of income.
Find out more about current income tax rates and National Insurance rates.