Income tax

Income tax rates, personal allowances, trusts etc.

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.

The Scottish Parliament set the rates of income tax and the limits at which these rates apply for Scottish residents on non-savings and non-dividend income.

Income tax is devolved to Wales on non-savings and non-dividend income.

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

2020/21:

Type Band of taxable income (£) Rate (%) Rate if dividends (%)
Starting rate for savings 0 - 5,000 0 N/a
Basic rate 0 - 37,500 20 7.5
Higher rate 37,501 - 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 - 2,085 19
Basic rate 2,086 - 12,658 20
Intermediate rate 12,659 - 30,930 21
Higher rate 30,931 - 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 - 37,500 10 10 20
37,501 - 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 2021/22 (£) 2020/21 (£)
Personal allowance 12,570 12,500
Marriage allowance 1,260 1,250

Blind person's allowance

£2,520 (2020/21: £2,500)

Married couple's allowance

Either partner born before 6th April 1935.

Reduction in tax bill 2021/22 (£) 2020/21 (£)
Maximum 912.50 907.50
Minimum 353.00 351.10
Age allowance income limit 1 30,400 30,200

Note...

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

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