The higher rate applies to income that falls above the basic rate band, taxing that portion of earnings, self-employment profits, and other income at a higher percentage. It is a common trigger for reviewing pension contributions and other tax planning.
Effect on allowances
Becoming a higher rate taxpayer can reduce the tax-free Personal Savings Allowance and affects the rate of Capital Gains Tax and dividend tax paid on income above the basic rate band.
Tax rules depend on individual circumstances and can change. This glossary is general information rather than personalised tax advice.