The highest rate of Income Tax in the UK is the extra rate tax. If you make more than £125,140 a year, you have to pay this.
How Does Income Tax Work? #
People in the UK who make more than £12,570 a year have to pay income tax. The first £12,570 is not taxed as income. This amount is called the “personal allowance.” Though, if you make more than £100,000 a year, you will slowly lose your right to this allowance, £1 at a time.
Check out these Income Tax rates for the tax year 2023–2024:
| Income | Tax rate | |
| Up to £12,570 | 0% | Personal allowance |
| £12,571 to £50,270 | 20% | Basic rate |
| £50,271 to £125,140 | 40% | Higher rate |
| Over £125,0140 | 45% | Additional rate |
Additional Tax Rate in Action #
The extra rate is 45% on earnings over £125,140 in the 2022–2023 tax year. For example, if you make £170,000 a year, you are an extra rate user. If your income is more than £125,140, you have to pay 45% tax.
That’s broken down like this in this case:
- 45% on £44,860
- 40% on £99,730
- 20% on 50,270
If you make more than £125,140 in Scotland, you have to pay an extra 47% tax on your wages.
When Do I Pay 60% Tax? #
You start to lose your right to the Personal Allowance when you make more than £100,000 a year. For every £2 you make over £100k, you lose £1. But you don’t pay 45% tax until you make more than £125,140. That means that on the Personal Allowance, you lose between £100,000 and £125,140, you pay an extra 20% tax. It might be hard to understand this, so read our guide on the tax effects of making more than $100,000 and how to avoid them.
