Understanding basic rate tax and income taxes in general is important to maintaining your financial health. Knowing how much of your income you are going to be required to put towards your taxes each year is essential in making important financial decisions.
Basic rate tax and other income tax rates are discussed in greater detail below. The information discussed applies to England, Scotland, Wales, and Northern Ireland online trademark registration Get online trademark registration. Registered trademark in India with ebizfiling. We offers brand trademark registration India, TM Registration. Apply online for Trademark Registration Services in India with 100% Money back guarantee. Call us at +91 8262 990 990, Email at email@example.com
Right off the bat, it is important to clarify the difference between taxable income and total income. Though the two are similar, they are not the same.
All taxpayers in the United Kingdom are given a specific amount of tax-free income. This is often known of as a personal allowance. In addition to a personal allowance, some UK citizens receive additional allowances and other forms of tax reliefs.
Because sorting between taxable income and total income can be complex and challenging, it is recommended by many that you have a financial advisor or financial planner help sort things out for you. Investing in such an expert’s advice and knowledge might cost a little up front but it could save you loads of money and time down the road in the long-run.
The most common type of income tax in the United Kingdom is basic rate tax. The cutoff amount for income is £32,010.
Higher Rate Tax
Those that make more than £32,010 in taxable income are required to pay a higher rate on their taxes. This rate is currently set at 40 percent. The higher rate of 40 percent is paid on any income over the £32,010 mark. Income below that is still taxed at the basic rate. The higher rate tax applies to taxable income of up to £150,000 in a single year.
Additional Rate Tax
The United Kingdom’s additional rate tax only applies to those with a taxable income of more than £150,000 per year. If you make more than this, you will have to pay an additional 45 percent on however much you made above this level. Additional rate tax is the highest rate of tax in the UK.
Starting Rate for Savings
Of particular note, especially for those with low incomes, is the starting rate for savings. This is a special tax break provided to those with low incomes. It makes it so that some or all of your income from savings is only taxed at 10 percent.
In the United Kingdom, low income means that you make less money than your personal allowance plus an extra £2,790.
Taxes, income, and income taxes can all be very confusing subjects. Yet they are essential to your financial health. For these reasons, it is important to have a thorough, if basic, understanding of them. Knowing what rate you will be paying on your taxes will help you make sure your finances run smoothly.
Luckily, there is a plethora of additional information on basic tax rates and other income tax rates available online. Educate yourself on this and tax season will be all the easier to cope with.