Lesson 6: Understanding Taxes - Cheat Sheet
UK Tax Bands (2023/24)
Band | Taxable Income | Tax Rate |
Personal Allowance | Up to £12,570 | 0% |
Basic Rate | £12,571 to £50,270 | 20% |
Higher Rate | £50,271 to £125,140 | 40% |
Additional Rate | Over £125,140 | 45% |
- Note: Personal Allowance reduces by £1 for every £2 earned over £100,000
National Insurance Contributions (2023/24)
Class | Who Pays | Rate |
Class 1 (Employees) | Employed earning over £242/week | 12% between £242-£967/week, 2% above |
Class 2 (Self-employed) | Self-employed profits over £12,570 | £3.45 per week |
Class 4 (Self-employed) | Self-employed profits over £12,570 | 9% between £12,570-£50,270, 2% above |
Key Tax Allowances
Allowance | Amount (2023/24) | Notes |
Personal Allowance | £12,570 | Tax-free income |
Dividend Allowance | £1,000 | Tax-free dividends |
Personal Savings Allowance | £1,000 (basic), £500 (higher), £0 (additional) | Tax-free interest |
Capital Gains Tax | £6,000 | Tax-free gains |
ISA Allowance | £20,000 | Tax-free savings/investments |
Pension Annual Allowance | £60,000 or 100% of earnings | Tax relief on contributions |
Marriage Allowance | £1,260 | Transfer to spouse/civil partner |
Trading Allowance | £1,000 | Tax-free trading income |
Property Allowance | £1,000 | Tax-free property income |
Tax-Efficient Investment Vehicles
Vehicle | Annual Limit | Tax Benefits | Access Restrictions |
ISA | £20,000 | Tax-free growth and withdrawals | None |
Lifetime ISA | £4,000 (part of ISA allowance) | 25% government bonus + tax-free growth | First home or retirement (60+) |
Pension | £60,000 or 100% of earnings | Tax relief at income rate, tax-free growth, 25% tax-free lump sum | Access from 55 (57 from 2028) |
Premium Bonds | £50,000 | Tax-free prizes | None |
EIS | £1,000,000 | 30% income tax relief, CGT deferral, tax-free growth | Higher risk, 3-year minimum hold |
VCT | £200,000 | 30% income tax relief, tax-free dividends and growth | Higher risk, 5-year minimum hold |
Self-Assessment Key Dates
Deadline | Action |
April 6 | Tax year begins |
October 5 | Deadline to register for self-assessment |
October 31 | Paper return deadline |
January 31 | Online return deadline and payment deadline |
July 31 | Second payment on account (for self-employed) |
April 5 | Tax year ends |
Tax Code Meanings
Code | Meaning |
L | Standard personal allowance |
M | Marriage Allowance recipient |
N | Marriage Allowance transferor |
T | Other calculations determine tax |
K | Income from previous year not taxed, or taxable benefits exceed allowances |
BR | All income taxed at basic rate (20%) |
D0 | All income taxed at higher rate (40%) |
D1 | All income taxed at additional rate (45%) |
NT | No tax to be deducted |
Common Tax-Deductible Expenses (Self-Employed)
- Office costs (stationery, phone bills, etc.)
- Travel costs (fuel, train tickets, etc.)
- Clothing expenses (uniforms, protective wear)
- Staff costs (salaries, subcontractor costs)
- Financial costs (insurance, bank charges)
- Costs of your business premises (heating, lighting, business rates)
- Advertising or marketing (website costs, newspaper ads)
- Training courses related to your business
Tax Planning Strategies
- Maximize pension contributions (especially valuable if earning £100,000-£125,140)
- Use ISA allowances before tax year-end
- Transfer assets between spouses to use both CGT allowances
- Time income and expenses strategically if self-employed
- Make Gift Aid donations to extend basic rate band
- Consider salary sacrifice for benefits (pension, childcare, cycle to work)
- Review investments for tax efficiency (location optimization)
- Use losses to offset gains for CGT purposes