tax on your salary

Tax on your salary appears on your pay statement in the deductions section as Pay As You Earn (PAYE).  Additional payments such as Longer Separation Allowance (LSA) is also taxed under PAYE, but Operational Allowance (OA), Local Overseas Allowance (LOA), Get You Home (GYH) and Home to Duty (HTD) are not.

The amount you pay is calculated as follows (unless you are based in Scotland):
  • Personal allowance.  The first £12,570 of your income is tax free (unless you have a different tax code).
  • Basic rate.  The next £12,571 to £50,270 is taxed at 20%.
  • Higher rate.  The next £50,271 to £125,140 is taxed at 40%.
  • Additional rate.  Over £125,140 is taxed at 45%.
In Scotland, the rates vary as follows (you'll pay this if you are based in Scotland):
  • Personal allowance.  The first £12,570 of your income is tax free (unless you have a different tax code).
  • Starter rate.  The next £12,571 to £14,876 is taxed at 19%.
  • Basic rate.  The next £14,877 to £26,561 is taxed at 20%.
  • Intermediate rate.  The next £26,652 to £43,662 is taxed at 21%.
  • Higher rate.  The next £43,663 to £75,000 is taxed at 42%.
  • Advanced rate.  The next £75,001 to £125,140 is taxed at 45%.
  • Top rate.  Over £125,140 is taxed at 48%.
In both of the above cases, you do not get a Personal Allowance on income over £125,140.

Helpfully, as a member of the Armed Forces based in Scotland, the military will refund the excess tax you pay compared to those in the rest of the UK.  You'll receive this automatically into your June pay.  This additional payment appears as a Tax Mitigation Payment on your payslip.  If you do the calculations on this payment, you'll notice that the payment is actually subject to income tax, but the pre-tax payment (gross) is higher than the amount of tax you would have paid due to being in Scotland.  When the tax is then deducted, the money you receive (net) is equal to the additional tax you paid the previous year. 

Throughout this site, and in other areas, you will see references to being a basic rate or higher rate taxpayer.  This means your salary falls into the bracket for that rate.  For example, if you earn £40,000 a year in England, you would be a basic rate taxpayer.  If you earn £60,000 a year in England, you are a higher rate taxpayer. 

To calculate how much tax you would expect to pay based on your salary, you can use the calculator on the gov.uk website.