Understanding UK taxes — Income Tax, National Insurance, Council Tax, VAT, PAYE, and Self-Assessment.
| Band | Income Range | Tax Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic Rate | £12,571 — £50,270 | 20% |
| Higher Rate | £50,271 — £125,140 | 40% |
| Additional Rate | Over £125,140 | 45% |
Scotland has different rates: Starter (19%), Basic (20%), Intermediate (21%), Higher (42%), Top (47%).
• Local tax for council services (bins, roads, police)
• £1,200-£3,000/year (Band
A-H)
• Based on property value
• 25% discount for single occupants
• Students are
exempt
• Paid monthly to local council
• Standard rate: 20% (most goods/services)
• Reduced rate: 5% (energy, child car
seats)
• Zero rate: 0% (food, children's clothes, books)
• VAT is included in the
price displayed
• No sales tax added at checkout (unlike US)
• 0% on first £250,000
• 5% on £250,001-£925,000
• 10% on £925,001-£1,500,000
• 12%
above £1,500,000
• First-time buyers: 0% up to £425,000
• Scotland: LBTT (different
rates)
• Pay As You Earn — tax taken automatically by employer
• Tax code: e.g., 1257L (£12,570
tax-free)
• Monthly payslip shows tax + NI deducted
• Most employees don't need to
file a tax return
• Self-assessment for self-employed/additional income