Income Tax
The most well known tax is Income Tax, this is often automatically deducted from your income and the percentage that is charged will depend on your annual income.
Deductions from your salary
It is likely that your main source of income will be the salary paid by your employer, and it is common for your employer to automatically deduct income tax from any payments made.
The rate of deduction will be determined by your income, and this will be represented by a tax code that should be visible on any pay slips you receive. For more information about Tax Codes, please click here.
Deductions from other income
Other sources of income that are subject to deductions include;
- Pensions
- Interest paid by Account Providers on Savings
For tax-free savings, we suggest that you look at a Cash ISA - Dividend payments from any shares held
- Income from renting property to tenants
- Any payments received from a trust.
Rates of Income Tax
Income |
Income Tax rate on earned income* | Income Tax rate on savings | Income Tax rate on dividends |
£1 to £2,320 Starting rate: |
N/A |
10%** | N/A |
£1 to £36,000 Basic rate: |
20% | 20% | 10% |
£36,001 and above Higher rate: |
40% | 40% | 32.5% |
* Employment, Self Employment, Pensions and Rental Income.
** If your savings are below £2320
Paying your Income Tax
If in employment, it is likely that your employer will pay the tax for you through a system called PAYE (Pay As You Earn) and it will be confirmed on your payslip.
If you are Self Employed, a Company Director / Shareholder or have other investments such as rented property, it is important that you file a self assessment tax return with HM Revenue and Customs.
If you receive interest on any savings you have, the tax would have been paid in advance by the bank / building society, with the exception of tax free savings accounts such as Cash ISA's.
THE DIRECT ADVICE TAX GUIDE
Taxes for Individuals
Income Tax - National Insurance - Stamp Duty - Inheritance Tax
Taxes for Businesses