Income Tax Calculator

June 13th, 2022

Income Tax Calculator

Enter your salary and find out how much income tax and National Insurance you'll pay in the chosen tax year.

Everything You Need To Know About Using An Income Tax Calculator In The UK

When it comes to knowing how much tax you need to pay in a given year, the process can get complicated, fast. First of all, you will need to have a clear idea as to how much your annual income adds up to, and use this figure to find out which specific tax band you will belong to. Checking the UK government website will give you a quick guide to the different tax bands, and the rate of income tax that each income bracket must pay [1].

How UK Income Tax Works

Here in the UK, the amount of income tax you need to pay is based on your income for the tax year. This income can include the money that you earn in your job, money from rental properties, and any profits that you make in a business that you own. You may also need to pay income tax on your pension, as well as any savings or dividends from shares if their value exceeds a certain amount.

If you are employed and receive your salary through the PAYE system, then your income tax will automatically be deducted from your pay each month. This will include deductions made for your state pension. However, if you are self-employed, or earn a significant amount, then you will need to submit your own income tax assessment and payments. This is also the case if you have a regular job where you receive PAYE, but also have other sources of income, such as rental properties or a small business.

What Is Counted

If your income exceeds your personal tax free allowance, then you will be required to pay tax on the amount that is the greater than this sum. For most UK residents, the personal tax free allowance is currently set at £12,750, although this allowance may be higher if you are in receipt of benefits such as Marriage Allowance or Blind Person’s Allowance. And if you are lucky enough to earn more than £100,000 in a year, you will find that your tax free allowance will be set to a lower amount.

There are other tax free allowances available, too, including any interest on savings, and any dividends from a company in which you own shares. There is also a tax free allowance of the first £1000 for self-employed workers’ income, as well as an allowance of £1000 for money that comes from property that you rent out, although this doesn’t apply to the Rent-A-Room scheme. Other income tax discounts include income tax reliefs, which are awarded according to eligibility criteria.

Using A UK Income Tax Calculator

There are many free calculator tools available which make it easy to understand the amount of tax that you will need to pay. By entering just a few details, you can quickly get a clear idea of what you will owe. Of course, obtaining an accurate result will be dependant on having complete records of your income, so you can correctly calculate your gross (total) pre-tax income. Using an income tax calculator in UK settings can be a valuable tool that can help you to avoid being penalised for submitting the wrong income tax figures.

Using A UK Rental Income Tax Calculator

If you rent out one or more properties in the UK, then you will also need to work out how much income tax you will owe based on these assets. Usually, the first £1000 of income received from your rental properties will be part of your tax free allowance, but it’s always important to check whether you qualify. Using a rental income calculator is an excellent tool to help clarify how much you should be paying in tax for this type of income.

References

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