You can work out your tax by following these four stages:
- Work out whether your income is taxable or not.
Some income is taxable and some is tax-free.
There are several different tax allowances to which you might be entitled.
Every man, woman and child in the UK has a ‘personal allowance’. For most people born after 5 April 1938, the personal allowance for the tax year starting on 6 April 2015 and finishing on 5 April 2016 is £10,600.
There is also a blind person’s allowance for those who qualify. Despite its name, you do not have to be completely without sight to claim it, so if you have very poor eyesight, check if you could be entitled.
Higher age-related personal allowances might be claimed if you were born before 6 April 1938. If you are part of a married couple or a civil partnership and either you or your spouse or partner was born before 6 April 1935, a married couple’s allowance might be available.
You can find out more information on these allowances on our page ‘what tax allowances am I entitled to? ’
If you qualify, a small amount of savings income might be taxed at 0%.
Next there is the basic rate band, where most types of income are taxed at 20%. Most people are within the basic rate band.
But for people with higher levels of income, 40% and 45% tax rates can also apply.
See our section ‘what tax rates apply to me? ’ for more details.
But take care: some deductions might not be allowed and some tax is not refundable, for example, the tax credit on UK dividends.
To work out your tax, you have to do the following calculation:
- First, take your allowances from your income to work out your taxable income.
- Second, HM Revenue & Customs charge tax on your taxable income using the rates of tax that apply to you. The tax rates are set each year.
For most individuals with simple tax affairs the way the tax calculation works is as set out below. The tax year runs from 6 April one year to 5 April the next. Negative or minus numbers are shown in brackets.