In the UK you have to pay tax on your income. There are currently 3 different uk tax rates ranging from 20% to 45%. The amount you have to pay on your income depends on how much to earn. In basics terms the more money you earn the more tax you have to pay.
The good news is there is something called a personal allowance. This is a set amount of money you can earn before you have to start paying tax. The personal allowance changes each year and is set by the UK Government. As of 2019-2020 the personal allowance is £12,500 and runs from the 6th of April to the 5th of April the following year. In basic terms you have a year to use up your personal allowance and resets once the finical year it up.
Once your personal allowance is used up the below uk tax rates will apply;
- Personal allowance amount up to £50,000 you will have to pay 20% tax.
- From £50,000 to £150,00 you will have to pay 40%.
- If you earn over £150,000 your tax rate will be 45%
Once you earn over £100,000 you will lose your right to a personal allowance, meaning you will have to pay tax on the whole amount of your earnings. It is annoying but you will be earning over £100,000 so it’s not all bad.
How your tax is paid
If you are self-employed your tax will be taken out and decided when filling in your self-assessment. It’s important during the finical year to put your tax aside for when it comes to payment. The last thing you want to happen is not to have enough money to pay your tax bill. It can lead to prosecution and serious consequences.