To calculate roughly how much income tax is payable for a particular tax year, use the following steps. The income tax rules are complex so this will not necessarily give you the precise answer in every case:
Step 1 Add together all your taxable income, before tax, from all sources, including employed earnings and self-employed profits, taxable social security benefits, income from renting out accommodation, pensions and interest from bank and building society accounts, for the year. Leave out non-taxable income such as housing benefit, pension credit, maternity allowance, child benefit, child tax credit and working tax credit, personal independence payment, premium bond prizes and lottery winnings. For a full list of tax-free income see Taxable and non-taxable income. You must use gross amounts in Step 1, that is, the amount of taxable income before any tax was deducted. This will give you your total income for working out how much tax you have to pay.
Step 2 Check whether you can claim tax relief for any money you have spent out over the year. For example, on your contributions to a pension scheme (but not on pension contributions where tax relief is given at source – these are taken into account in Step 4) or for paying certain employment expenses. Take these off your total income here. If you are self-employed, business expenses are deducted before reaching your taxable profit.
Step 3 Check which tax free allowances you are entitled to. If you live in the UK on a day to day basis, you will be entitled to a basic Personal Allowance. If your income is over £100,000 your personal allowance is less. If you were born before 6 April 1948, you will be entitled to a higher age-related Personal Allowance, although this may be restricted depending on your income. If you are blind, you could get a Blind Person’s Allowance. These allowances are deducted at this stage of the calculation, leaving an amount of income on which tax is payable. This amount is called your taxable income.