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UK Income Tax Rules

The I-resign.com salary calculator is based upon the following rules as laid out by the government (Inland Revenue Service) at the last budget statement, given on 21 March 2007. These rules are valid until the next budget. The salary calculator assumes that you are a regular employee, and not a company director or self-employed and is only valid for the United Kingdom.


National Insurance Contributions

National Insurance contributions for employees are calculated on your pay per week. The bands are shown below.

Pay Per Week National Insurance Rate
First £87 NIL
Salary over £87 and under £670 11%
Salary over £670 1%

Allowance

ALLOWANCE AMOUNT
Personal
- Basic £5,225
- Age 65-75 £7,550
- Age 75 and over £7,690
Blind Personal £1,730
Married Couple's
This allowance has been abolished. The Over 65 rate will apply to those whose 65th birthday was before 6th April 2000.
- Age 65-75 £6,285
- Age 75 and over

£6,365

Your Allowance is the amount of money you are allowed to earn without paying income tax.

Your Personal Allowance depends on your age. For example, if you are under 65 and earn £28,400 per annum your allowance is £5,225. This means you have to pay income tax on £23,175. If you are also blind, you will only pay income tax on £21,445.

If you are married, and you turned 65 before 6th April 2000 you and your spouse receive a Married Couple's Allowance. This is a payment given back to you after your income tax has been deducted. The amount returned is equal to the maximum allowance at 10%, so essentially £628. If you said you were married, the Tax Calculator has factored this figure into your net pay.


Income Tax Rates

TAX RATE INCOME RANGE AFFECTED
10% £0-£2,230 of taxable income
22% £2,231-£34,600
40% £34,601 and above

There are three bands of income tax. Your taxable income is the amount you earn minus your personal allowance (see above).


Tax Credits

In 2001, tax credits were introduced. The tax calulator supports a simple version of the child tax credit.

 

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