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how much do I have to pay?

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. This is called your 'Personal Allowance' and is set at £6,475 for 2010/11. You will then pay 20%, 40% or 50% 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 2010/11 tax year.

item rate
£0 - £6,475 0%
£6,476 - £37,400 20%
£37,401 - £150,000 40%
Above £150,000 50%
Thus, if you have a wage of, say £17,500, you will pay tax as follows:
Income Rate Tax payable
£6,475 0% £0
£11,025 20% £2,205
Total Payable   £2,205
Don’t forget you will also have to pay National Insurance contributions on any income, so your earnings will be reduced once again (see section on National Insurance).
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