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.

The starting rate band is only applicable to savings income. The 0% rate is not available if the taxable amount of non-savings income exceeds the starting rate band.

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. 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.

2023/24:

TypeBand of taxable income (£)Rate (%)Rate if dividends (%)
Basic rate0 - 37,700208.75
Higher rate37,701 - 125,1404033.75
Additional rateOver 125,1404539.35

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

TypeBand of taxable income (£)Rate (%)
Starter rate0 - 2,16219
Basic rate2,163 - 13,11820
Intermediate rate13,119 - 31,09221
Higher rate31,093 - 125,14042
Top rateOver 125,14047

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 - 37,700101020
37,701 - 125,140301040
Over 125,140351045

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

Savings Allowance:

Band of taxpayerAmount (£)Rate (%)
Basic rate1,0000
Higher rate5000
Additional rate0N/a

Dividend Allowance:

Band of taxpayerAmount (£)Rate (%)
All1,0000

2022/23:

TypeBand of taxable income (£)Rate (%)Rate if dividends (%)
Basic rate0 - 37,700208.75
Higher rate37,701 - 150,0004033.75
Additional rateOver 150,0004539.35

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

TypeBand of taxable income (£)Rate (%)
Starter rate0 - 2,16219
Basic rate2,163 - 13,11820
Intermediate rate13,119 - 31,09221
Higher rate31,093 - 150,00041
Top rateOver 150,00046

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 - 37,700101020
37,701 - 150,000301040
Over 150,000351045

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

Savings Allowance:

Band of taxpayerAmount (£)Rate (%)
Basic rate1,0000
Higher rate5000
Additional rate0N/a

Dividend Allowance:

Band of taxpayerAmount (£)Rate (%)
All2,0000

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

Allowances2023/24 (£)2022/23 (£)
Personal allowance12,57012,570
Marriage allowance1,2601,260

Blind person's allowance

£2,870 (2022/23: £2,600)

Married couple's allowance

Either partner born before 6th April 1935.

Reduction in tax bill2023/24 (£)2022/23 (£)
Maximum1,037.50941.50
Minimum401.00364.00
Age allowance income limit 134,60031,400

Note...

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

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