Taxation in the United Kingdom/Income tax

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In the personal income taxation computations, one counts all the income of individuals from different sources, and then subtracts the allowable deduction from that (those which are allowed by the H.M.R.C.) In the United Kingdom, the income sources are classified into three: Non-Savings Income, Savings Income & U.K. Dividend. For all three there are three bands suggested to divide/classify the levels of income, on which tax is liable to U.K. Government (of course we must take into account that taxation is one of the major sources of income for any government). These bands are Starting Band, Basic Band and Higher Band.

Income Tax and Capital Gains Tax rates

                                  2006/07         2005/06
                                      £               £
Starting rate on first              2,150           2,090 
Basic rate on next                 31,150          30,310
Higher rate on taxable income over 33,300          32,400

                         General   Savings   Dividend

Starting                   10%       10%       10%
Basic                      22%       20%       10%
Higher                     40%       40%       32.5%