PLEASE NOTE: The charity TaxAid advises only those people on low incomes whose problems cannot be resolved with HMRC.

Tax rates and taxable bands

Income Tax

Income tax is paid at different rates on different types of income. The rate of tax also changes with the amount of income.

The main rates of income tax are:

The starting rate for savings – a 0% rate of tax is available for  savings to cover savings income (which is income from savings or investments, e.g. interest on bank or building society accounts, bonds, gilts etc.) of up to £5,000.

This rate only applies to an individual on low income. If your non savings income is over £16,850 then the 0% band is not available..

The Personal Savings Allowance for 2018/19 is £1,000 for a basic rate taxpayer (£500 for higher rate taxpayer). This means that the first £1000 (£500 for higher rate taxpayers) of savings income is free of tax.

There is guidance on the HMRC web pages at https://www.gov.uk/apply-tax-free-interest-on-savings.

The dividend allowance 

The dividend allowance for 2018/19 is £2,000 (it was £5,000 in 2017/18). See https://www.gov.uk/government/publications/dividend-allowance-factsheet/dividend-allowance-factsheet for details.

General Income tax rates for 2018/19

20% on taxable income from £0 to £34,500

40% on taxable income from £34,501 to £150,000

45% on taxable income over £150,000