How UK Income Tax Works
The UK income tax system features a Personal Allowance of £12,570 — income below this is tax-free. Rates rise through Basic (20%), Higher (40%), and Additional (45%) rates. Most employees pay via PAYE. Scotland has its own 6-band structure with rates from 19% to 48%.
| Band | Income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic Rate | £12,571–£50,270 | 20% |
| Higher Rate | £50,271–£125,140 | 40% |
| Additional Rate | Over £125,140 | 45% |
- →National Insurance (employees): 8% on £12,570–£50,270, then 2% above
- →NI (self-employed): Class 4 at 6% on profits £12,570–£50,270 (cut from 9% in April 2024), then 2% — plus Class 2 £3.45/week
- →Personal Allowance tapers by £1 for every £2 of income above £100,000
- →Marriage Allowance: transfer £1,260 of PA to partner, saving up to £252/year
- →Scotland: completely different 6-band system from 19% Starter Rate to 48% Top Rate
- →Pension contributions (SIPP, workplace) are fully deductible from taxable income