Taxable Income
The portion of your total income that is actually subject to income tax after deducting the Personal Allowance and any other reliefs or deductions you are entitled to. It is calculated by taking your gross income from all sources, subtracting the Personal Allowance and any allowable reliefs, and then applying the tax bands to what remains. Pension contributions, Gift Aid donations, and trading losses can all reduce your taxable income.
Related Terms
Personal Allowance
The amount of income you can earn in a tax year before paying income tax, currently £12,570 and frozen until April 2028.
Tax Bands
The ranges of taxable income to which different income tax rates apply, creating the UK's progressive tax system.
Effective Rate
The average rate of tax you pay across all your income, calculated by dividing your total tax bill by your gross income.
Marginal Rate
The rate of tax paid on the next pound of income you earn, which determines the tax cost or saving of earning slightly more or less.
Self Assessment
The system by which individuals report their own income, gains, and reliefs to HMRC each year through an online or paper tax return, rather than having tax collected automatically under PAYE.
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Use our free tool to see how taxable income affects your tax.