Need to Know: Income Tax and National Insurance

Income Tax

How much income tax you pay depends on how much of your income is above your personal allowance and how much of your income falls within each tax band.

  • 0% on the first £12,570 (personal allowance)

  • 20% on the next £37,000 (basic rate band)

  • 40% above £50,270 (Higher rate threshold)

  • 45% over £150,000 (Additional rate)

Marriage tax allowance allows you to transfer £1260 of your personal allowance to your spouse or civil partner if they earn more than you. To benefit, you must normally have an income below your personal allowance and can reduce your partners tax by up to £252.

If your income exceeds £100,000, your personal income tax allowance is gradually taken away from you. It is reduced by £1 for every £2 you earn after £100,000. 

What is taxed

You pay income tax on:

  • money you earn from employment

  • profits you make if you're self-employed

  • some state benefits

  • most pensions

  • rental income

  • benefits you get from your job

  • income from trusts

  • interest on savings over your savings allowance

National Insurance

National insurance is made up of contributions deducted from your pay and from your employer.  The amount deducted and paid depend on your National Insurance category letter and how much of the earnings fall within each band.

Employee National Insurance rates

This table shows how much employers deduct from employee pay

Employer National Insurance rates

This next table shows how much employers pay towards employee National insurance