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Basic tax rate

  • 2 min read

The basic tax rate (BR) is the rate of Income Tax that you pay when you earn between £12,571 and £50,270. This rate is accurate as of the 2022/23 tax year

How much is the basic tax rate?

If you pay BR tax, you’re liable to pay 20% Income Tax in England and Wales. 

Following the 2022 Spring Statement, Chancellor Rishi Sunak announced that by 2024, the basic Income Tax rate will decrease to 19%. This change was made to combat the increased cost of living.

How does it work?

You only pay tax on your taxable income. Yes, it sounds obvious, but it can be a little confusing at first. Take a look at the current rates of Income Tax:

Income Tax rate
Up to £12,570 0% Personal allowance
£12,571 to £50,270 20% Basic rate
£50,271 to £150,000 40% Higher rate
over £150,000 45% Additional rate

Let’s look at an example:

  • If you earn £30,000, you owe 20% on £17,729 of your income
  • If you earn £55,000, you owe 20% on £37,699; 40% on £4,730

Basically, it’s important to remember that you often don’t owe the above tax rates on your income as a whole. It’s only the portion of your income that falls into certain tax brackets. So if you earn, say, £155,000, you’ll be taxed at three different rates: the basic rate, the higher rate and the additional rate.

I earn £155,000 – how am I taxed?
£50,270 20%
£99,730 40%
£5,000 45%

What’s the Personal Allowance?

The Personal Allowance is the income that you can earn tax-free in the UK. That means that when you earn less than £12,570, you aren’t liable to pay Income Tax. You may also be wondering why the Personal Allowance is missing from the above table. That’s because when you earn £100,000 and more, you gradually start to lose your tax-free Personal Allowance, pound by pound. 

When you earn more than £125,000, you lose your entitlement to the Personal Allowance entirely.

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