7.2 Income tax
Income tax is the tax you pay on your income. You may obtain your income from your employment, from letting a property or from self-employment.
If someone earns £1,000 from self-employment or earns at least £2,500 income that is not taxed, then they will need to submit a Self Assessment [Tip: hold Ctrl and click a link to open it in a new tab. (Hide tip)] form.
If you earn less than £100,001, then you get a Personal Allowance, which is the amount of income on which you do not have to pay income tax. Presently, the personal allowance is £12,570.
You may also get a Personal Savings Allowance on your savings. Remember, you do not have to pay tax on ISAs.
The table below (HMRC, 2025) shows tax rates for different levels of income.
| Band | Taxable income | Tax rate |
|---|---|---|
| Personal allowance | up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | over £125,140 | 45% |
For an example of how tax is calculated with a personal allowance, visit Tax on savings interest: How much tax you pay by HMRC.
7.1 What is HMRC?
