The UK income tax system means that income is divided into different bands, however income tax bands are different if one lives in Scotland. In England, Wales and Northern Ireland, the first of four bands is the Personal Allowance, and this has a tax rate of zero per cent. The taxable income for this band is a maximum of £12,500. This means that no income tax is required to be paid on a person’s first £12,500 of income.
The next band of tax is known as the Basic rate.
This means that any taxable income between £12,501 and £50,000 will be taxed at a rate of 20 per cent.
The Higher rate tax band covers taxable income between £50,001 and £150,000.
It means that taxable income within this range will be taxed at a 40 per cent rate.
The Additional rate applies to taxable income of more than £150,000, and the tax rate stands at 45 per cent.
Those with taxable income of more than £100,000 may not get the full UK Personal Allowance.
This is because for every £2 of income above this threshold, the Personal Allowance reduces by £1.
The government website states: “The Personal Allowance goes down by £1 for every £2 of income above the £100,000 limit. It can go down to zero.”
This is known as the income limit for Personal Allowance and it means that some people may get less of the £12,500 tax relief, or none of it at all.
In fact, in the tax year of 2019/20, those with taxable income of more than £125,000 will not get the Personal Allowance.
Some people may take notice of their personal tax code.
The tax code that a person has affects the amount that they pay in tax.
Tony Mills, Director of Online Tax Rebates, said: “Your tax code is usually a combination of a number and a letter.
“The number often relates to the amount you can earn before paying tax; for example, 1250L would mean you can earn the full personal allowance (£12,500) before paying tax.
“This number may be lower if you’re claiming for expenses such as wearing a uniform at work or professional subscriptions, or if you’re given benefits in kind by your employer such as a company car or medical insurance.”