Income Tax

  • From: Andy White
  • Date: 16 Feb 1999
  • Subject: How to calculate Income Tax

How can I calculate the income tax payable by a single man earning £950 per month?

Maths Help suggests:

We recommend you use the following procedure:

  1. Calculate annual income.
  2. Deduct allowances to find the taxable income.
  3. Work out lowest rate tax.
  4. Work out basic rate tax.
  5. Work out highest rate tax.
  6. Find the total tax.

It is important to work out income tax based on annual income.

In your case, this is

12 × £950 = £11400

Tax Allowances 1999/2000

Personal Allowance: £4335
Married Couple's Allowance: £1900 (subject to restriction)
Every tax payer has this allowance One of the married couple (usually the husband) receives this additional allowance

In your example, the man is single so the allowance is £3765. Therefore the taxable income is

£11400 - £4335 = £7065

Tax at the Lowest Rate

Lowest Tax Rate: 20p
Paid on the first £4300 of taxable income
20p is short for 20p in the pound, equivalent to 20%

In your example, the taxable income is more than £4300, so the tax paid is:

20% of £4300 = £860

Tax at the Basic Rate

Basic Tax Rate: 24p
Paid on taxable income between £4300 and £27100
24p is short for 24p in the pound, equivalent to 24%

The first £4300 of taxable income has been taxed (at the lowest rate).

The remaining part of the taxable income is:

£7065 - £4300 = £2765

All of this is charged at the basic rate:

24% of £2765 = £663.60

Tax at the Highest Rate

Highest Tax Rate: 40p
Paid on taxable income above £27100
40p is short for 40p in the pound, equivalent to 40%

The man in your example does not have a taxable income above £27100, so no tax is paid at the highest rate.

Your man pays a total annual tax of

£860 + £663.60 = £1523.60

We will update this page to keep you informed of any changes in the taxation system.

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