Are you in the UK and want to have your Income Tax Explained? Well in this video, that's exactly what we are going to do. Income Tax in the UK doesn't need to be so complicated, so let's get it explained.

So let’s start with a bit of housekeeping. All the rates and numbers I’m going through in this video are accurate at time of filming. You see the first thing you need to know is that instead of agreeing with the basic concept the romans came up with of when a year starts, HMRC begin their confusion by saying that a tax year runs from 6th April to the 5th April. Oh, and HMRC stands for Her Majesty’s Revenue and Customs by the way, they are in charge of collecting the tax. Think of them as the Queens debt collectors if you will.

So although the basic concepts discussed in this video will be the same, the rates can change from year to year as per the chancellors budget so make sure that you know the rates applicable for the year when you are watching this.

If you're in Scotland, your income tax rates are different too!

How much income tax you pay in each tax year depends on how much of your income is above the personal allowance and how much of your income falls within each tax band. We’ll run through some examples in a minute.

The personal allowance is the amount of money you are allowed to earn before you have to pay tax. Currently, it’s £12,500. So if you earn less than this, you keep it all.

Next is the basic rate band. This is all income over the £12,500 personal allowance and under £50,000. You’ll pay 20% on any income that falls in this band. So for every £100 in this band, you'll pay £20.

Next is the higher rate band. If you earn over £50,000, you’ll pay 40% on this portion of your income until you get to £150,000. So for every £100 in this band, you’re going to lose £40 in tax.

If you earn over £150,000 you’ll pay additional Rate tax of 45% on any amounts over this. For every £100 in here, you’re going to give up £45.

One of the common misconceptions people often have is ‘there is no point me earning more money because I’ll just pay more and more tax and won’t see any of it.’ Not true.

The Personal Allowance goes down by £1 for every £2 of income above £100,000 and it can go down to zero. So if you earn more than £125,000 you actually lose your personal allowance entirely.

There are some great online calculators that will do all the heavy lifting for you. One that I like is THE SALARY CALCULATOR https://www.thesalarycalculator.co.uk... as you can get full breakdown’s of the calculations if you need.

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Hi there! My name is Tom Morgan, Founder & Financial Planner of Orca Wealth Ltd, welcome to my YouTube channel ‘That Finance Show’. I’m very glad to have you here because this channel gives me the opportunity to help people and share information with those who wouldn’t normally get it.

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RISK WARNINGS

When investing remember, your capital is at risk. Investments can fall and rise and you may get back less than you invested. Tax treatment depends on your individual circumstances and may be subject to change. This channel is for information and entertainment only. The information provided by Tom and That Finance Show is not intended to address your particular requirements and should not be construed as advice. Neither Tom or ‘That Finance Show’ will not be held responsible for any actions you take as a result of watching these videos.