- 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.
Income tax rates
|Band of taxable income||Rate||Rate if dividends|
|0 – 37,700||Basic rate||20||8.75|
|37,701 – 150,000||Higher rate||40||33.75|
|Over 150,000||Additional rate||45||39.35|
|Special rates for savings and dividend income falling into above bands of taxable income|
|Basic rate taxpayers||1,000||0|
|Higher rate taxpayers||500||0|
|Additional rate taxpayers||Nil||N/A|
|for all taxpayers||2,000||0|