At Cactus, we’re here to shed some light on prickly payroll/finance topics🌵
Taxes are an inevitable part of life and can be a source of confusion for many. At Cactus, we’re here to shed light on this essential aspect of your financial life. Income tax plays a role in funding public services in the UK, including the NHS, education, welfare, infrastructure, and housing. In this blog, we’ll break down the fundamentals, the rates, and how it’s calculated.Â
It is calculated based on your wage, whether this comes from your salary, self-employment, or other sources of income. In the United Kingdom, the collection of tax is managed by HMRC.Â
Calculating Your Income Tax:
In the UK, the amount of income tax you pay is determined by your total income for the tax year. The percentage of tax you pay increases as your earnings rise.
Basic Rate (20%): If your annual income falls within the range of £12,571 to £50,270, you’ll pay the basic rate of tax, which is 20%.
Higher Rate (40%): Any earnings over £50,270 will be taxed at a higher rate of 40%.
Additional Rate (45%): For those with a yearly income over £125,140, there is an additional rate of 45% on earnings over this threshold.
Tax-Free Allowance:
It’s important to note that you will not pay the tax if your annual income is below £12,570. This is known as your ‘tax-free allowance’.
In Conclusion, it is a critical source of revenue for funding essential public services here in the UK. Understanding how it works, the different tax rates and the tax-free allowance can help you manage your finances more effectively. At Cactus, we’re committed to helping you navigate the world of taxes and finance. If you have more questions or need personalised advice regarding any other financial matter, don’t hesitate to reach out.