Finance > Tax (employee Focus)
Income Tax Rates and Bands
Income tax rates and bands are used to indicate the amount of tax you will be required to pay for your level of income. Whilst you are unlikely to ever have to do these calculations personally, it is worth understanding the basics as, ultimately, the amount of tax you pay is your own responsibility.
There are three main rates of tax: Basic, Higher and Additional. The table below summarises the tax bands and respective tax rates for the 2022/23 tax year (i.e. the period from 6 April 2022 to 5 April 2023).
Note: It assumes you have a standard personal allowance.
| Band | Income | Tax Rate |
|---|---|---|
|
Personal Allowance |
Up to £12,570 |
0% |
|
Basic Rate |
£12,571 – £50,270 |
20% |
|
Higher Rate |
£50,271 – £150,000 |
40% |
|
Additional Rate |
Over £150,000 |
45% |
Let’s go through a few examples:
Example 1:
Your salary is £40,000 for the 2022/23 tax year.
1. First, we deduct the personal allowance of £12,570.
£40,000 – £12,570 = £27,430
£12,570 of your income is not taxable.
2. The remaining £27,430 is taxed at 20% as all of this income falls within the basic rate tax band.
£27,430 x 20% = £5,486
Therefore, the total tax you will pay on your salary for the 2022/23 tax year is £5,486.
Example 2:
Your salary is £95,000 for the 2022/23 tax year.
1. First, we deduct the personal allowance of £12,570.
£95,000 – £12,570 = £82,430
£12,570 of your income is not taxable.
2. The next £37,700 (the income between your personal allowance of £12,570 and £50,270) is taxed at 20%.
£37,700 x 20% = £7,540
3. The remaining £44,730 is taxed at 40% as the rest of the income falls within the higher rate tax band.
£44,730 x 40% = £17,892
Therefore, the total tax you will pay on your salary for the 2022/23 tax year is £25,432.
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