Hello everyone.

I recently came across an article about UK tax brackets on Your Company Formations' website, and I have a question regarding how they work in practice. The article outlines the different tax bands for income, but I’m still unclear on a few points.

For example, how are your earnings taxed if they fall into multiple brackets? Does the entire income get taxed at the higher rate, or just the portion that exceeds the lower bracket threshold?

I’d appreciate it if someone could provide a clearer explanation or examples of how tax brackets apply in the UK.

In the UK, tax is applied progressively. If your earnings fall into multiple tax brackets, only the portion of your income that exceeds the threshold for each bracket is taxed at the higher rate. For example, if you earn £60,000:

The first £12,570 is tax-free.
The next £37,700 (from £12,571 to £50,270) is taxed at 20%.
The remaining £9,730 (from £50,271 to £60,000) is taxed at 40%.
So, only the income above each threshold is taxed at the higher rate, not the entire amount. This system is what we refer to as the Tax Brackets UK system, which ensures progressive taxation.

The UK tax system is structured into income bands known as tax brackets. Each bracket determines the rate at which your income is taxed, from the basic rate to the higher and additional rates. For the 2024/25 tax year, earnings up to £12,570 are tax-free due to the personal allowance. Income beyond that is taxed progressively. Understanding UK tax brackets helps individuals plan their finances effectively and avoid unexpected liabilities. Interestingly, much like U‑channel outdoor sign post brackets support signage, tax brackets support fiscal structure—ensuring stability and clarity in how earnings are taxed across varying income levels.