Income Tax Rates

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.

The dividend rate is partially satisfied by a 10% tax credit given on dividends. Therefore dividends falling within the basic rate band do not suffer any additional tax.

Income Tax Rates

Income Tax Rates 2016/2017 2015/2016
10% starting rate (for savings income only) to: n/a £2,880
20% basic rate on income to: £43,000 £31,865
40% higher rate on income to £150,000 £150,000
45% additional rate on income above £150,001+ £150,001+
Higher rate on dividends 32.5% 32.5%
– effective rate with tax credit 25% 25%
Additional rate on dividends 38.1% 37.5%
– effective rate with tax credit 30% 30%
The starting rate band is only applicable to dividends and savings income.
The 10% rate is not available if the taxable amount of non-savings income exceeds the starting rate band.