What is the Additional Rate of Tax?
The additional rate of tax is the highest rate of tax payable in the UK. The additional rate becomes active if you earn more than £125,139 from 6 April 2023.
Additional rate taxpayers will receive a tax free personal allowance which is currently worth £12,570.
Income after your tax free personal allowance will be subject to tax at three different rates with the additional tax rate being the highest.
From 6 April 2023 £1 of the Personal Allowance is withdrawn for every £2 of income above £100,000 up to £125,139.
After the additional threshold has been reached you will not have any personal allowance.
What is the rate of additional tax?
A 45% rate of tax will be applied to your income if you become an additional rate taxpayer.
The rates at which income tax will be payable are:
Basic rate of tax £12571 to £50270 at 20%.
Higher rate of tax £50271 to £150,000 (changing to £125,139 from 6 April 2023) at 40%.
Additional rate of tax from £125,140 at 45%.
When do you pay the additional rate of tax?
You will only need to pay the additional rate of tax from when the additional rate threshold starts. The amount of tax charged will be staggered as per the figures above so you won’t need to pay additional rate tax on all of your income.
The additional rate of tax should not be confused with the higher rate of tax which is lower and set at 40%.
