Possibly the one expense we all have in common is our tax bill, and this can be a challenge for many people to deal with and quite confusing simply figuring out how much income tax you need to pay.
We are here to help you work out your income taxes so that you know how much money you need to pay. We will also cover how much tax free allowance you should have or at least how to find out your tax free allowance.
If you just want to quickly workout how much you will pay then use out After-Tax Calculator. You will also be able to see other metrics such as how much National Insurance you should be paying as well as any pension contributions.
Income Tax Personal Allowance
In the UK there is an income tax free allowance which means that if you earn less than a certain amount per year you do not have to pay Income Tax on your earnings. Anything above this allowance will be taxed.
For the 2022/23 tax year the income tax free allowance is £12,570. This means you can make this much without having to give a penny to the government. (There are some circumstance which may change your income tax free allowance, for more info visit - https://www.gov.uk/browse/tax/income-tax)
Income Tax Bands
The UK has four bands of income tax, these are (for 2022/23):
| Personal Allowance | Up to £12,570 | 0 |
|---|---|---|
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £150,000 | 40% |
| Additional rate | over £150,000 | 45% |
This means all income between the different bands will be taxed their appropriate amounts.
The next section shows an example calculation based on the tax bands above.
Example Calculation
The following calculation was made using our After-Tax Calculator
Let's say we are making £50,000 per year. The easiest way to workout your taxes manually is to start at the higher bands. We know based on the table above that we will not be paying any additional rate, or higher rate tax so these can be ignored.
Starting with the basic rate due to the cap for the basic rate being £50,270 and in our example we are making £50,000. We don't want to just apply the tax to this whole income as we have lower bands that have their own rule. To find out how much is taxable income for that band we will takeaway the lower band number from the income:
£50,000 - £12,570 = £37,430
So this means £37,430 is your taxable income for the basic band. The tax rate for this band is 20% and the tax calculation is as follows.
20% of £37,430 = £7,486
Then we can move to the next band down. Because we know we were already in a higher band, we essentially want to workout the tax for all values within the next tax band down. Our next tax band is the personal allowance.
We already know we have the full tax free allowance and due to no tax being paid on it we don't have to workout anything else. Below is a more visual breakdown of how the tax was calculated
| Tax Band | Income within Band | Tax to Be Paid |
| Personal Allowance (up to £12,570) | £12,570 | 0% (£0) |
| Basic Band (£12,570 - £50,000 | £37,430 | 20% (£7,486) |
| Higher Rate (£50,271 to £150,000) | £0 | 40% (£0) |
| Additional Rate (Over £150,000) | £0 | 45% (£0) |
I hope you found this information useful! If you did please share it with others and comment below what you thought of this post. For more information on your taxes visit the official government website (www.gov.uk)
Thanks for Reading.
FAQ
How do I work out my tax?
The quickest way you can do this is by using our After-Tax Calculator, it will also provide further information such as your Pension and National Insurance. You will also be able to specify if your are blind person or live in Scotland which can influence your taxes.
How is my tax code worked out?
Your tax code is normally the amount you can earn without paying tax, divided by 10, with a letter added. (moneyhelper.org.uk)
Tax code: 1257L 1257 becomes £12,570 earned before tax.
What is an emergency tax code?
Sometimes your tax code isn't right for your circumstances and you might be given an emergency code. An emergency tax code assumes that you're only entitled to the basic personal allowance. It'll mean you'll pay tax on all your income above the basic personal allowance (£12,570 for 2021-22).
It won't take into account any allowances or reductions and reliefs you might be entitled to. This could mean you pay more tax than you should be a short period of time. (moneyhelper.org.uk)
How do I check my tax code?
To make sure you're on the right tax code, check your code matches the Personal Allowance you should be getting (moneyhelper.org.uk)
What do I do if I think my tax code is wrong?
If you think your tax code is wrong, or if you're in any doubt, contact HMRC.
https://www.gov.uk/tax-codes
It's important you give them all the information they ask for so you don't end up on the wrong tax code and pay too much or too little tax. (moneyhelper.org.uk)