Income tax

Rates

Income tax applies to the amount of income after deduction of personal allowances.

Income is taxed in a specific order with savings and dividend income taxed last.

Dividend income and savings income falling within the dividend and savings allowances still form part of total income of an individual.

There is also a starting rate band (SRB) of £5,000 which is only applicable to savings income. The band is not available if the taxable amount of non-savings income exceeds the SRB.

Scottish resident taxpayers are liable on non-savings and non-dividend income as set out below. Savings income and dividend income are taxed using UK tax rates and bands.

Income tax is devolved to Wales. Welsh resident taxpayers continue to pay the same overall income tax rates using the UK rates and bands. The total rate of income tax = UK income tax + Welsh rate of income tax. Savings income and dividend income are taxed using UK tax rates and bands.

2022/23:

Type Band of taxable income (£) Rate (%) Rate if dividends (%)
Basic rate 0 - 37,700 20 8.75
Higher rate 37,701 - 150,000 40 33.75
Additional rate Over 150,000 45 39.35

For Scottish residents the following bands apply for non-savings and non-dividend income:

Type Band of taxable income (£) Rate (%)
Starter rate 0 - 2,162 19
Basic rate 2,163 - 13,118 20
Intermediate rate 13,119 - 31,092 21
Higher rate 31,093 - 150,000 41
Top rate Over 150,000 46

For Welsh residents the following bands apply for non-savings and non-dividend income:

Band of taxable income (£) UK Rate (%) Welsh Rate (%) Overall Rate (%)
0 - 37,700 10 10 20
37,701 - 150,000 30 10 40
Over 150,000 35 10 45

There are special rates for savings and dividend income falling into above bands of taxable income.

Savings Allowance:

Band of taxpayer Amount (£) Rate (%)
Basic rate 1,000 0
Higher rate 500 0
Additional rate 0 N/a

Dividend Allowance:

Band of taxpayer Amount (£) Rate (%)
All 2,000 0

2021/22:

Type Band of taxable income (£) Rate (%) Rate if dividends (%)
Basic rate 0 - 37,700 20 7.5
Higher rate 37,701 - 150,000 40 32.5
Additional rate Over 150,000 45 38.1

For Scottish residents the following bands apply for non-savings and non-dividend income:

Type Band of taxable income (£) Rate (%)
Starter rate 0 - 2,097 19
Basic rate 2,098 - 12,726 20
Intermediate rate 12,727 - 31,092 21
Higher rate 31,093 - 150,000 41
Top rate Over 150,000 46

For Welsh residents the following bands apply for non-savings and non-dividend income:

Band of taxable income (£) UK Rate (%) Welsh Rate (%) Overall Rate (%)
0 - 37,700 10 10 20
37,701 - 150,000 30 10 40
Over 150,000 35 10 45

There are special rates for savings and dividend income falling into above bands of taxable income.

Savings Allowance:

Band of taxpayer Amount (£) Rate (%)
Basic rate 1,000 0
Higher rate 500 0
Additional rate 0 N/a

Dividend Allowance:

Band of taxpayer Amount (£) Rate (%)
All 2,000 0

Allowances

A personal allowance gives an individual an annual amount of income free from income tax.

Income above the personal allowances is subject to income tax.

The personal allowance will be reduced if an individual's 'adjusted net income' is above £100,000. The allowance is reduced by £1 for every £2 of income above £100,000.

An individual born before 6 April 1935 may be entitled to a married couple's allowance but this is reduced if 'adjusted net income' is above the married couple's allowance income limit (see table below).

Marriage allowance - 10% of the personal allowance may be transferable between certain spouses where neither pays tax above the basic rate. The Marriage allowance is not available to couples entitled to the Married Couple's allowance.

Personal Allowance

Allowances 2022/23 (£) 2021/22 (£)
Personal allowance 12,570 12,570
Marriage allowance 1,260 1,260

Blind person's allowance

£2,600 (2021/22: £2,520)

Married couple's allowance

Either partner born before 6th April 1935.

Reduction in tax bill 2022/23 (£) 2021/22 (£)
Maximum 941.50 912.50
Minimum 364.00 353.00
Age allowance income limit 1 31,400 30,400

Note...

  1. Reduce married couples allowance by £1 for every £2 of 'adjusted net income' above this limit.
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