Blog

Income tax rates

Personal tax allowance: Income tax rates

Income tax rates

Your personal tax allowance denotes how much you can earn without being charged income tax. Even if you go over this allowance, you will only be taxed on earnings above it. However, this amount changes each year, and it’s worth knowing what you’re paying, especially when it comes to doing tax returns. The tax accountants at Tax Agility can show you what you need to know.

How much can you save?

Before anything else is calculated, you must first figure out your personal tax allowance. As this changes each year it’s best to check the government website, but for 2018/19 the bands and payments are as follows:

  • Earning under £100,000 – You are entitled to £11,850 of tax-free income
  • Earning between £100,000 and £123,700 – The £11,850 allowance decreases by £1 for every £2 you earn, until it reaches £0
  • Earning more than £123,700 – You are not entitled to any tax-free income

Note that if you are blind, then you are entitled to an extra £2,390 of tax-free income on top of any that you already have.

Constantly changing

If you’ve visited the HMRC website, you may notice that every year is listed as having different tax rates. The tax year begins on 06 April, and any changes are made on that date. Consequently, the tax bands are re-evaluated each year and the Chancellor of the Exchequer’s budget is taken into consideration when calculating the new rates. This is why it’s advisable to hire professional tax accountants like us, as each year the optimal way of paying tax must be recalculated.

The tax bands

If you have a personal allowance, there are specific tax bands that you fall into, separate from the normal ones. They are:

  • Personal Allowance – This band concerns you if you earn up to £11,850. You pay no tax if you fall into this band.
  • Basic rate – If you earn between £11,851 and £34,500, then you fall into this band. You pay a tax of 20%.
  • Higher rate – If you earn between £34,501 and £150,000, then you fall into this band. You pay a tax of 40%.
  • Additional rate – If you earn over £150,000, you fall into this band. You pay a tax of 45%.

There are several exceptions to these, such as Income Tax Relief and Marriage Allowance, but otherwise, this is the main thing that you need to know. Note that these rates only apply if your personal tax allowance is exactly £11,850, and if you claim benefits such as Blind Person’s Allowance then the rates can vary. More information can be found on the government website here.

Tax is our speciality

At Tax Agility, our personal tax accountants are experienced in providing proactive personal tax services. Tax laws are complicated and change regularly, and getting someone to sort it out for you can save you a great deal of time and stress.

To find out how we can sort your tax issues out, talk to one of our personal tax accountants on 020 8108 0090 or use our Online Form.

Before you go, check out: