What You Need to Know About Income Tax?
Do you know what income tax is? Well, it is a tax which you need to pay on your income or earnings. This income tax you pay in each tax year depends on how much of your income is above your Personal Allowance and how much of it falls within each tax band. The tax year normally runs from 6 April one year to 5 April the following year. However, you don’t have to pay such of type of tax on all types of income.
Here is a list of the income where you do not have to pay your income tax and are tax-free.
- Income from Individual Savings Accounts (ISAs) and National Savings Certificates
- Some state benefits
- Premium bond or National Lottery wins
- First rental income of £4,250
As most of you in the UK get a Personal Allowance, the
standard Personal Allowance of £10, 600 is the amount of income where you do not have to pay your tax on. The standard Personal Allowance was £10,000 in the previous tax year from 6 April to 5 April 2015.
Being born before 6 April 1938 will make your Personal Allowance greater. On the other hand, if your income is over £100,000, your Personal Allowance may be less.
If you have a standard Personal Allowance, then you should pay basic rate of 20% on income over £10,600. Likewise, higher rate of 40% needs to be paid on income over £42,395 and additional rate of 45% on income over £150,000.
If you are a higher or additional rate taxpayer, you need to pay extra tax on dividends. And, if your income is less than the standard Personal Allowance, then you can claim the New Marriage Allowance tax for reducing your partner’s tax. Moreover, if you or your partner were born before 6 April 1935, you are able to claim Married Couple’s Allowance.
If you have any more queries on the income tax, you can get in touch with our
tax accountants today at
info@phoenixtaxaccountancy.co.uk.
