UK Income Tax Calculator

What is UK Income Tax?

UK Income Tax is a system of taxation where individuals pay a portion of their earnings to the UK government. The amount of tax paid is determined by a person's taxable income and tax year. The UK uses a progressive tax system, meaning that the tax rate increases as the taxable income increases.

The UK Income Tax Formula

The general formula for calculating UK income tax is:

\[Tax = \sum_{i=1}^{n} (Income_{i} \times Rate_{i})\]

Where:

• \(Income_{i}\) = Taxable income in bracket i
• \(Rate_{i}\) = Tax rate for bracket i
• n = Number of applicable tax brackets

Step-by-Step Tax Calculation

1. Determine the tax year and applicable tax brackets.
2. Calculate the tax for each bracket where income falls: \[Tax_{bracket} = (Income_{in bracket} - Lower threshold) \times Rate_{bracket}\]
3. Sum up the tax from all applicable brackets to get the total tax.
4. Calculate the effective tax rate: \[Effective Rate = \frac{Total Tax}{Total Income} \times 100\%\]

Example Calculation

Let's calculate the income tax for a UK resident with an annual income of £50,000 in the 2023-2024 tax year:

1. £0 - £12,570: \(12,570 \times 0\% = £0\)
2. £12,571 - £50,000: \((50,000 - 12,570) \times 20\% = £7,486\)
3. Total Tax: \(£0 + £7,486 = £7,486\)
4. Effective Tax Rate: \(\frac{7,486}{50,000} \times 100\% = 14.97\%\)

Visual Representation

The blue portion of the bar represents the effective tax rate (14.97%) for the given income.