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 10% rate of tax is available, subject to strict conditions, to cover savings income ( of income from savings or investments (e.g. interest on bank or building society accounts, bonds, gilts etc.) of up to £2,880 for 2014-15  (2013-14 £2,790).

You only get the 10% rate on your savings income if your other, non-savings, income in the tax year is low. Other ‘non-savings’ income includes income from employment, pensions, self-employment, rental income etc.

This means that for an individual entitled to the £10,000 personal allowance in 2014-15, the 10% rate for savings would only be available if their non-savings income is less than £12,880.

There is guidance on the HMRC website at See also:  Taxation of savings and Pensioners sections.

The dividend ordinary rate of 10% - dividend income is taxed at 10% where total taxable income is no more than £31,865 in 2014-15 (£32,010 for 2013-14). There are higher rates of tax on dividends of 32.5% and 37.5% on dividend income where total income is above this level in 2014-15 (and 2013-14). These correspond to the 40% and  45% income tax bands.

The basic rate – the normal rate of tax for most people – 20% on income up to £31,865 in 2014-15 (£32,010 for 2013-14)

The higher rate – a higher rate of tax for those with higher incomes – 40% on income between £31,865 and £150,000 per year (32,010 to £150,00 in 2013-14)

The additional rate of tax – a higher rate of tax of 45% for those with an income over £150,000 per year in 2013-14 and 2014-15.

TaxAid helpline

Our helpline offers professional, free, confidential advice to people on low incomes