Income Tax is the main tax UK residents pay on their earnings, including employment income, self-employment profits, pensions, rental income, and most savings and investment income above certain allowances. It is charged on total taxable income after deducting the Personal Allowance and any other reliefs.
Income Tax bands and rates
Once the Personal Allowance is used up, income is taxed at the basic rate, then the higher rate, then the additional rate as it rises through each band. Scotland has its own set of Income Tax bands and rates that differ from the rest of the UK, so residency matters when working out the exact amount due.
How Income Tax is collected
Employees usually have Income Tax deducted automatically through PAYE, while the self-employed and those with other untaxed income report and pay it through Self-Assessment. Getting the tax code or return wrong can lead to underpayment or overpayment, so it is worth reviewing tax codes and returns carefully each year.
Tax rules depend on individual circumstances and can change. This glossary is general information rather than personalised tax advice.