Income tax applies to the amount of income after deduction of personal allowances.
Income is taxed in a specific order with savings and dividend income taxed last.
Dividend income and savings income falling within the dividend and savings allowances still form part of total income of an individual.
There is also a starting rate band (SRB) of £5,000 which is only applicable to savings income. The band is not available if the taxable amount of non-savings income exceeds the SRB.
The Scottish Parliament set the rates of income tax and the limits at which these rates apply for Scottish residents on non-savings and non-dividend income.
Income tax is devolved to Wales on non-savings and non-dividend income.
| Type | Band of taxable income (£) | Rate (%) | Rate if dividends (%) |
|---|---|---|---|
| Basic rate | 0 - 37,700 | 20 | 7.5 |
| Higher rate | 37,701 - 150,000 | 40 | 32.5 |
| Additional rate | Over 150,000 | 45 | 38.1 |
For Scottish residents the following bands apply for non-savings and non-dividend income:
| Type | Band of taxable income (£) | Rate (%) |
|---|---|---|
| Starter rate | 0 - 2,097 | 19 |
| Basic rate | 2,098 - 12,726 | 20 |
| Intermediate rate | 12,727 - 31,092 | 21 |
| Higher rate | 31,093 - 150,000 | 41 |
| Top rate | Over 150,000 | 46 |
For Welsh residents the following bands apply for non-savings and non-dividend income:
| Band of taxable income (£) | UK Rate (%) | Welsh Rate (%) | Overall Rate (%) |
|---|---|---|---|
| 0 - 37,700 | 10 | 10 | 20 |
| 37,701 - 150,000 | 30 | 10 | 40 |
| Over 150,000 | 35 | 10 | 45 |
There are special rates for savings and dividend income falling into above bands of taxable income.
| Band of taxpayer | Amount (£) | Rate (%) |
|---|---|---|
| Basic rate | 1,000 | 0 |
| Higher rate | 500 | 0 |
| Additional rate | 0 | N/a |
| Band of taxpayer | Amount (£) | Rate (%) |
|---|---|---|
| All | 2,000 | 0 |
| Type | Band of taxable income (£) | Rate (%) | Rate if dividends (%) |
|---|---|---|---|
| Starting rate for savings | 0 - 5,000 | 0 | N/a |
| Basic rate | 0 - 37,500 | 20 | 7.5 |
| Higher rate | 37,501 - 150,000 | 40 | 32.5 |
| Additional rate | Over 150,000 | 45 | 38.1 |
For Scottish residents the following bands apply for non-savings and non-dividend income:
| Type | Band of taxable income (£) | Rate (%) |
|---|---|---|
| Starter rate | 0 - 2,085 | 19 |
| Basic rate | 2,086 - 12,658 | 20 |
| Intermediate rate | 12,659 - 30,930 | 21 |
| Higher rate | 30,931 - 150,000 | 41 |
| Top rate | Over 150,000 | 46 |
For Welsh residents the following bands apply for non-savings and non-dividend income:
| Band of taxable income (£) | UK Rate (%) | Welsh Rate (%) | Overall Rate (%) |
|---|---|---|---|
| 0 - 37,500 | 10 | 10 | 20 |
| 37,501 - 150,000 | 30 | 10 | 40 |
| Over 150,000 | 35 | 10 | 45 |
There are special rates for savings and dividend income falling into above bands of taxable income.
| Band of taxpayer | Amount (£) | Rate (%) |
|---|---|---|
| Basic rate | 1,000 | 0 |
| Higher rate | 500 | 0 |
| Additional rate | 0 | N/a |
| Band of taxpayer | Amount (£) | Rate (%) |
|---|---|---|
| All | 2,000 | 0 |
A personal allowance gives an individual an annual amount of income free from income tax.
Income above the personal allowances is subject to income tax.
The personal allowance will be reduced if an individual's 'adjusted net income' is above £100,000. The allowance is reduced by £1 for every £2 of income above £100,000.
An individual born before 6 April 1935 may be entitled to a married couple's allowance but this is reduced if 'adjusted net income' is above the married couple's allowance income limit (see table below).
Marriage allowance - 10% of the personal allowance may be transferable between certain spouses where neither pays tax above the basic rate. The Marriage allowance is not available to couples entitled to the Married Couple's allowance.
| Allowances | 2021/22 (£) | 2020/21 (£) |
|---|---|---|
| Personal allowance | 12,570 | 12,500 |
| Marriage allowance | 1,260 | 1,250 |
£2,520 (2020/21: £2,500)
Either partner born before 6th April 1935.
| Reduction in tax bill | 2021/22 (£) | 2020/21 (£) |
|---|---|---|
| Maximum | 912.50 | 907.50 |
| Minimum | 353.00 | 351.10 |
| Age allowance income limit 1 | 30,400 | 30,200 |
Note...