Income Tax Rates Allowances 2023

Tax Tables - Income Tax Rates For Tax Year 2023 (Scotland has its own Scottish Rates of Income Tax SRIT)

Income Tax Rates 06/04/2023 to 05/04/2024

Personal allowances
The amount you can earn/pension income before tax is deducted i.e.  no tax to pay.  The current personal allowances are:

• Born After 05/04/1938 - £12,570.00
• Born before 06/04/1938 - £12,570.00
• Additional Blind Person's Allowance - £2,870.00

Note: Personal allowances may be lower if have income in excess of £100,000 or you have underpaid tax in the past or if you have adjustments for taxable benefits in kind such as private medical insurance and a company car or if child benefit was claimed but you earn too much.  Personal allowances may also be higher if you claim for things like a uniform cleaning allowance or your spouse passes 10% of their allowance to you.

Tax Rates

Income above the above mentioned 'tax free' personal allowances is charged at the following rates:

Starting Rate Tax / Lower Income Taxation
(if you only have lower cash/bank interest and earned income or pension income)

• If your total earned income and/or pension income and yearly interest on cash/bank account savings is LOWER than the Personal Allowance £12,570.00 and the Starting Rate Allowance £5,000.00 combined then you pay 0.00 % tax on savings interest

• If your total earned income and/or pension income and yearly interest on cash/bank account savings is HIGHER than the Personal Allowance £12,570.00 and the Starting Rate Allowance £5,000.00 combined then the Starting Rate Allowance of up to £5,000.00 at 0.00 % does not apply and all taxable income including savings income is taxed on the normal tax bands in excess of your normal personal allowance.

Working Out The Tax - How it works - work out taxable income first

• From Gross/Total Income deduct your personal allowance.  This is your taxable income.

Basic Rate 20.00 % tax on taxable income below £37,700.00. 

• If your taxable income is BELOW £37,700.00 then income tax at 20.00 % is payable on all this income above your personal allowance.
• If your taxable income is ABOVE £37,700.00 then income tax at 20.00 % is payable up to £37,700.00 and the excess taxable income will be taxed at higher rate tax as follows

Higher Rate 40.00 % tax on taxable income in excess of £37,700.00

• If you have taxable income above £37,700.00 then 40.00 % tax is payable on taxable income between £37,700.00 and £125,000.00
• For every £2 earned over £100,000.00, your personal allowance is reduced by £1.
• Meaning earners over £125,140.00 have no personal allowance.

Additional Rate 45.00 % tax on taxable income above £125,000.00.

• For every £2 earned over £100,000.00, personal allowance is reduced by £1.
• Meaning earners over £125,140.00 have no personal allowance.
• 0-£37,700.00 taxed at 20.00 %, £37,701.00 - £125,000.00 taxed at 40.00 %, £125,141.00 + taxed at 45.00 %

Tax Rates for Discretionary Trusts and Accumulation and Maintenance Trusts:

• Standard rate 0.00 % on first £1,000.00 income
• Income from dividends (shares) - taxed at 39.35 %
• All other income (savings and rental income) - taxed at 45.00 %

Savings Income Tax Rates (i.e.  Bank/Building Society Interest Received)

• 0.00 % tax for a lower/starting rate tax payer, can reclaim excess if deducted at 20.00 % provided all income including savings income is below the £5,000.00 'starting rate' savings interest only allowance limit + personal allowance £12,570.00 or older persons age allowance (£12,570.00)
• 20.00 % tax for a basic rate taxpayer
• 40.00 % tax for a higher rate taxpayer
• 45.00 % Additional Rate tax for High Earners in excess of £125,000.00

Working Tax Credit & Children’s Tax Credit: Means tested - amount will vary

Widows bereavement allowance: £2,000.00 (not taxable)

Registered Blind Persons Allowance: £2,870.00

Age Allowance Income Limit - For people born before 6 April 1938 there is an extra personal allowance (known as age allowance) which is slightly larger than the £12,570.00 normal personal allowance of £12,570.00.  This will be reduced by £1 for every £2 of income over £34,600.00.  The reduction will not take the personal allowance below the normal £12,570.00 unless your income is over £100,000.00.

Married Couples Allowance (for elderly couples) £10,375.00.  Relief for the married couples allowance and other linked allowances was abolished in April 2000.  However for married couples and civil partners where one person was born before 6 April 1935, they are able to keep the entitlement and obtain tax relief at a rate of 10%.  The reduction that applies for age allowance above where income exceeds £34,600.00 also applies to Married Couples Allowance but this allowance cannot fall below a "minimum amount" which is £4,010.00.

3.  Tax Deductable - Tax Deductions - Deductions That Can Be Taken Off Your Taxable Income

Gifts To Charity

You can make donations to charities (and receive tax relief on the payments) in the following ways:

• Under 'Give As You Earn'. This means that your employer deducts the amount you wish to give under a payroll deduction scheme.  There is no maximum limit that you can give.
• By Gift Aid Donation. Whether you give cash or shares, they will qualify for tax relief.  There is no minimum limit.
• By Deed Of Covenant. This will qualify for tax relief if it is able to run for at least four years.

Pension Contributions and Pension Tax Relief

Contributions up to this year's Annual Contribution Allowance are normally allowable but for higher earners this may not be the case:  See New Pension Tax Relief Rules.

Personal Contributions - You can make pension contributions up to certain limits and qualify for tax relief on your payments.  The contribution limits are based on the lower of your salary and the Annual Allowance figure set by Government each year. 

You can make excess contributions but these will not attract tax relief and contributions in excess of the annual allowance will attract tax penalties.

Employer Contributions - Employers can make contributions up to the Annual Allowance figure with no check towards an employee’s salary and claim tax relief.  Contributions in excess of the employee's salary may have tax relief withdrawn if deemed excessive by HM Revenue and Customs.  

An employer can make excess contributions over the annual allowance but these may attract tax penalties for the employee as well as no tax relief for the employer.   For large contributions, tax relief may be spread over a number of years.