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 the total income of an individual.
The starting rate band is only applicable to savings income. The 0% rate is not available if the taxable amount of non-savings income exceeds the starting rate band.
2018/19
| Type | Band of taxable income (£) | Rate (%) | Rate if dividends (%) |
|---|---|---|---|
| Starting rate for savings | 0-5,000 | 0 | n/a |
| Basic rate | 0-34,500 | 20 | 7.5 |
| Higher rate | 34,501 – 150,000 | 40 | 32.5 |
| Additional rate | over 150,000 | 45 | 38.1 |
Savings Allowance
| Band of taxpayer | Amount (£) | Rate (%) |
|---|---|---|
| Basic rate | 1,000 | 0 |
| Higher rate | 500 | 0 |
| Additional rate | 0 | n/a |
Dividend Allowance
| Band of taxpayer | Amount (£) | Rate (%) |
|---|---|---|
| All | 2,000 | 0 |
2017/18
| Type | Band of taxable income (£) | Rate (%) | Rate if dividends (%) |
|---|---|---|---|
| Starting rate for savings | 0-5,000 | 0 | n/a |
| Basic rate | 0-33,500 | 20 | 7.5 |
| Higher rate | 33,501 – 150,000 | 40 | 32.5 |
| Additional rate | over 150,000 | 45 | 38.1 |
Savings Allowance
| Band of taxpayer | Amount (£) | Rate (%) |
|---|---|---|
| Basic rate | 1,000 | 0 |
| Higher rate | 500 | 0 |
| Additional rate | 0 | n/a |
Dividend Allowance
| Band of taxpayer | Amount (£) | Rate (%) |
|---|---|---|
| All | 5,000 | 0 |
Allowances
A personal allowance gives an individual an annual amount of income that is free from income tax. Income above this allowance is subject to income tax.
The personal allowance will be reduced if an individuals 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 6th April 1935 may be entitled to a married couple’s allowance, but this is reduced if the adjusted net income is above the married couple’s allowance income limit.
Marriage allowance – 10% of a 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.
Personal Allowance
| Allowances | 2018/19 | 2017/18 |
|---|---|---|
| Personal allowance | £11,850 | £11,500 |
| Marriage allowance | £1,190 | £1,150 |
Married Couple’s Allowance
Either partner born before 6th April 1935
| Reduction in tax bill | 2018/19 | 2017/18 |
|---|---|---|
| Maximum | £869.50 | £844.50 |
| Minimum | £336.00 | £326.00 |
| Age allowance income limit * | £28,900 | £28,000 |
Note ..
* Reduce married couples allowance by £1 for every £2 of adjusted net income over £28,900.