How does income tax work UK?

Income tax is charged on money you earn above your Personal Allowance (£12,570). You pay different rates on different portions of income: 20% basic rate, 40% higher rate, 45% additional rate. Tax is usually collected automatically from wages through PAYE.

How much tax will I pay on £30,000 UK?

On £30,000 salary: £12,570 is tax-free (Personal Allowance), leaving £17,430 taxable at 20% = £3,486 income tax per year. You'll also pay National Insurance. Take-home pay after tax and NI on £30k is approximately £24,000.

What is the personal allowance UK?

The Personal Allowance is the amount you can earn before paying income tax — £12,570 (2024-25). It reduces by £1 for every £2 earned over £100,000, disappearing at £125,140. Some people (blind, married to non-earner) may have different allowances.

When do I pay 40% tax UK?

You pay 40% on income between £50,271 and £125,140 (2024-25). This doesn't mean all your income is taxed at 40% — just the portion in that band. Your first £12,570 is tax-free, then 20% up to £50,270, then 40% above that.

Income Tax Explained UK — Beginner's Guide | PocketWise

UK income tax doesn’t have to be confusing. Here’s how it actually works.

How Income Tax Works

The Basic Principle

Concept	How It Works
Personal Allowance	First £12,570 is tax-free
Tax bands	Different rates on different portions
Progressive system	Higher earners pay higher percentage
PAYE	Usually collected automatically

What Gets Taxed

Taxed	Not Taxed
Salary and wages	Personal Allowance amount
Self-employment profit	ISA interest and growth
Pension income	Premium Bond wins
Rental income	Some benefits
Savings interest (above PSA)	Employer pension contributions
Dividends (above allowance)	Some redundancy pay

Tax Bands and Rates

Income Tax Rates 2024-25

Band	Taxable Income	Rate
Personal Allowance	Up to £12,570	0%
Basic rate	£12,571 to £50,270	20%
Higher rate	£50,271 to £125,140	40%
Additional rate	Over £125,140	45%

Scotland Has Different Rates

Band	Taxable Income	Rate
Starter rate	£12,571 to £14,876	19%
Basic rate	£14,877 to £26,561	20%
Intermediate rate	£26,562 to £43,662	21%
Higher rate	£43,663 to £75,000	42%
Advanced rate	£75,001 to £125,140	45%
Top rate	Over £125,140	48%

Example Tax Calculations

£25,000 Salary

Portion	Calculation	Tax
First £12,570	Tax-free	£0
Next £12,430	20% of £12,430	£2,486
Total	—	£2,486

£40,000 Salary

Portion	Calculation	Tax
First £12,570	Tax-free	£0
Next £27,430	20% of £27,430	£5,486
Total	—	£5,486

£60,000 Salary

Portion	Calculation	Tax
First £12,570	Tax-free	£0
£12,571-£50,270	20% of £37,700	£7,540
£50,271-£60,000	40% of £9,730	£3,892
Total	—	£11,432

£100,000 Salary

Portion	Calculation	Tax
First £12,570	Tax-free	£0
£12,571-£50,270	20% of £37,700	£7,540
£50,271-£100,000	40% of £49,730	£19,892
Total	—	£27,432

Special Rules

£100,000+ Earners

Income	What Happens
Over £100,000	Personal Allowance reduces
Reduction	£1 for every £2 over £100k
£100,000-£125,140	Effective 60% marginal rate
Over £125,140	No Personal Allowance

Example: £110,000 Salary

Component	Calculation
Over £100k by	£10,000
Allowance reduction	£5,000 (half)
Remaining allowance	£7,570
Extra tax	On lost £5,000 at 40% = £2,000

Effectively 60% tax on income between £100k-£125k.

Child Benefit Charge

Income	What Happens
Over £60,000	Child Benefit charge kicks in
£60,000-£80,000	Charge is 1% per £200 over £60k
Over £80,000	Lose all Child Benefit

Personal Allowance Details

Standard Allowance

Year	Amount
2024-25	£12,570
2025-26	£12,570 (frozen)
Previous years	Lower

Other Allowances

Allowance	Amount	Who Gets It
Blind Person’s Allowance	£3,070	Registered blind
Marriage Allowance	£1,260 transfer	Low earner to spouse

Allowance Reduces

Situation	Effect
Income over £100,000	Allowance reduces
Income over £125,140	No Personal Allowance

How Tax Is Collected

PAYE (Most Employees)

Process	What Happens
Employer calculates	Tax based on your code
Deducted from pay	Before you receive it
Monthly adjustment	To hit annual target
Tax code tells employer	Your allowances

Self Assessment

Who Needs It	Details
Self-employed	All
High earners (>£150k)	Usually required
Rental income	Yes
Multiple income sources	Often yes
Untaxed income	Yes

Deadlines

Deadline	What For
5 October	Register for Self Assessment
31 October	Paper return deadline
31 January	Online return + payment

Common Situations

Two Jobs

What Happens	Details
Main job	Gets your full allowance
Second job	Usually taxed at 20% from £1
Tax code	Different for each job
Check	Correct codes applied

Benefits in Kind

Benefit	Taxable?
Company car	Yes
Private medical	Yes
Gym membership	Usually yes
Work mobile phone	No (one phone)
Cycle to work scheme	Tax advantage

Pension Contributions

Contribution Type	Tax Relief
Workplace pension (salary sacrifice)	Before tax
Personal pension	Basic rate added automatically
Higher rate	Claim via Self Assessment

Reducing Your Tax

Legitimate Ways

Method	How It Works
Pension contributions	Reduces taxable income
Salary sacrifice	Pay for benefits pre-tax
ISAs	Growth is tax-free
Marriage Allowance	Transfer allowance
Gift Aid	Higher rate gets relief

Common Tax Reliefs

Relief	Who Benefits
Pension tax relief	Everyone contributing
Working from home	Employees required to WFH
Professional subscriptions	If required for job
Uniform/tools	If employer doesn’t pay

Summary: Key Points

Tax Rates to Remember

Band	Rate
Personal Allowance (£0-£12,570)	0%
Basic rate (£12,571-£50,270)	20%
Higher rate (£50,271-£125,140)	40%
Additional rate (£125,140+)	45%

Important Numbers

Figure	Amount
Personal Allowance	£12,570
Basic rate band top	£50,270
Allowance disappears at	£125,140
60% trap zone	£100,000-£125,140

Quick Actions

Action	Why
Check your tax code	Ensure correct allowance
Review payslip	Tax calculated correctly
Use pension contributions	Reduce taxable income
Claim work expenses	If eligible
File Self Assessment	If required, before deadline

Understanding income tax helps you keep more of what you earn and make smarter financial decisions.