Income Tax calculator: How much tax will I pay? Find out here

Budget 2020: Rishi Sunak reveals income tax changes

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While income tax is mandatory for those who are included, you won’t usually have to pay tax on your entire income – even if it’s all taxable. This is because people are entitled to a certain amount of income tax-free every year, called your personal allowance. The tax year runs from April 6 one year to April 5 the following. There’s no minimum age as to when you have to start paying income tax, and instead, what matters most is the amount of your taxable income. If this is below a certain amount, you won’t be taxed at all.

Income tax is paid on:

  • Earnings from employment, including benefits in kind such as a company car
  • Earnings from self-employment
  • Most pensions income, including state, occupational and personal pensions
  • Some social security benefits
  • Interest on most savings
  • Income from shares (dividends)
  • Rental income
  • Income from a trust

How much tax will I pay?

The amount of income tax you’ll pay out depends entirely on how much your income is in excess of your personal allowance.

Your personal allowance could be bigger if you’re entitled to claim Marriage Allowance or Blind Person’s Allowance.

If you earn more than £100,000 per year, then your personal allowance is smaller.

If you’re an employee or a pensioner who pays tax through the Pay As You Earn (PAYE) scheme, your personal allowance will be spread out through the year. 

This means every month, you’ll have a certain amount of tax-free income and pay tax on the rest of it.

If you’re self-employed or have other taxable income not taxed through PAYE, your personal allowances will be taken into account when your tax bill is calculated.

Your tax bill is worked out after you submit your annual tax return or repayment claim.

If you’re employed or you get a pension, your tax is automatically deducted from your earnings.

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This is before you receive through the PAYE scheme, however, and is called ‘deduction at source’.

If you’re self-employed, your income tax isn’t deducted at source and so you have to do your own Self Assessment.

To check how much income tax you should be paying, use the calculator here.

As well as checking you’re paying the correct amount of income tax, you might want to check your National Insurance contributions too.

National Insurance contributions are calculated on gross pay – which is your total salary before tax is deducted.

If you’re employed, the amount of National Insurance you pay depends on the amount you earn and your pension agreements.

If you’re self-employed, you pay National Insurance contributions at different rates depending on your profits.

You can check exactly what your National Insurance contributions should be on the Gov website. 

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