UK Tax Rates

These notes explain the UK taxes on your earnings.


UK Payroll Taxes

There are two payroll deductions, Income Tax (PAYE) and National Insurance Contributions(NIC).

PAYE is re-calculated in each payroll on a cumulative basis. The tax payable in the current period is the difference from the previous cumulative.

NIC is based on the income of the payroll period, not on a cumulative basis.

NIC has different rates for Employer and Employee contributions.

Payroll taxes are paid monthly when the payroll data is uploaded to HMRC as Real Time Information (RTI). Payroll data cannot be changed after upload.


Income tax rates

UK excluding Scotland
Nil rate up to £12,570 nil

Basic rate £12,571 to £50,270 20%

Higher rate £50,271 to £100,000 40%

Marginal rate £100,001 to £125,140 60%

Top rate £125,140 and above 45%


Scotland

Nil rate up to £12,570 nil

Starter rate £12,571 to £14,732 19%

Basic rate £14,733 to £25,688 20%

Intermediate rate £25,689 to £43,662 21%

Higher rate £43,663 to £125,140 42%

Top rate £125,141 and above 47%


NIC rates

Employer
13.8% on pay above £9,100 pa, no upper limit.

Employee
10% on pay from £12,570 pa to £50,270 pa.

2% on pay above £50,271 pa, no upper limit.


Marginal rates, UK excluding Scotland

Salary below £9,100 pa has no PAYE; but there is employer NIC on income above £9,100.

From £9,101 pa to £12,570 pa your marginal rate is 13.8% (NIC employer 13.8%)

From £12, 571 pa to £50,270 pa your marginal rate is 43.8% (PAYE 20%, NIC employee 10% and NIC employer 13.8%)

From £50,271 pa to £100,000 pa your marginal tax rate is 55.8% (PAYE 40%, NIC employee 2% and NIC employer 13.8%)

On income between £100,001 pa to £125,140 pa there is a tax trap in which your marginal rate is 75.8% due to your personal allowance being reduced by £1 for every £2 of additional income.

Above £125,140 pa your marginal tax rate is 60.8% (PAYE 45%, NIC employee 2% and NIC employer 13.8%)


Apprenticeship Levy

Introduced in 2017/18, this is called a Levy not a Tax. The rate is 0.5% of Taxable Gross Salary for employers with a payroll over £3 million.


Dividend Tax Rates

Dividends will be declared in your annual tax return and paid by 31 January in the following year, unless a payment on account has been agreed.

Dividend / Rate

£0 - 1,000 Nil

£1,001 - £50,270 8.75%

£50,271 - £125,140 33.75%

Over £125,140 - no limit 39.75%

There is a tax trap by reducing your personal allowance if your combined taxable income is over £100,000. 


Capital Gains Tax Rates

Tax free allowance £6,000.

Standard Rate for gains on share transfers 20%

Lower rate of 10% is subject to availability of unused lower rate tax band.


Corporation Tax Rates

£0 - £50,000 19%

£50,001 - £250,000 26.5%

Above £250,000  25%