How much you pay depends on your income and there are very strict and sometimes quite complex rules about it. In very simple terms, everyone can earn a certain amount of money without paying any tax (your ‘Personal Allowance’). You will then pay 0%, 20% or 40% on the rest of your income. The rates of tax vary every year – the Chancellor of the Exchequer sets the rates at his Budget. As an example, the following rates apply to employed workers in the 2008/09 tax year.