Taxation in the United Kingdom/Income tax

In the personal income taxation computations, one counts all the income of individuals from different sources, and then subtracts the allowable deduction from that (those which are allowed by the H.M.R.C.) In the United Kingdom, the income sources are classified into three: Non-Savings Income, Savings Income & U.K. Dividend. For all three there are three bands suggested to divide/classify the levels of income, on which tax is liable to U.K. Government (of course we must take into account that taxation is one of the major sources of income for any government). These bands are Starting Band, Basic Band and Higher Band.

Income Tax and Capital Gains Tax rates

2006/07        2005/06                                      £               £ Starting rate on first              2,150           2,090 Basic rate on next                31,150          30,310 Higher rate on taxable income over 33,300         32,400

General  Savings   Dividend

Starting                  10%       10%       10% Basic                     22%       20%       10% Higher                    40%       40%       32.5%