Additional tax rate

Additional tax rate

The additional tax rate is the highest income tax rate in the United Kingdom. It is due on the income exceeding £150,000 each tax year.

How does income tax work?

Everyone in the UK who makes more than £12,570 yearly must pay income tax. The Personal Allowance is the first £12,570 of income tax-free income.

Take a look at the tax rates for the financial year 2022/23:

IncomeTax rate 
Up to £12,5700%Personal allowance
£12,571 to £50,27020%Basic rate
£50,271 to £150,00040%Higher rate
Over £150,00045%Additional rate

Additional rate tax example

On incomes beyond £150,000 in the 2022/2023 tax year, the additional rate is 45%. For instance, you are an additional rate taxpayer if your annual income is over £170,000. Any income over £150,000 is subject to a 45% tax rate.

In this scenario, that’s broken down like this:

● 45% on £20,000
● 40% on £112,300
● 20% on £37,700

When do I have to pay the 60% tax?

When you earn more than £100,000, you begin to lose your Personal Allowance claim. For every £2 you make beyond £100,000, you lose £1.

However, you won’t be taxed at 45% until you earn more than £150,000, meaning that between £100,000 and £125,140, you’ll be taxed an extra 20% on the Personal Allowances you’re losing.

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