Income tax rate
The income tax you pay is the total amount of tax calculated on your income, your financial interests in a company and your savings and investments, less deductible items. Tax credits are deducted from the total tax payable.
Tax credits are deducted from your income tax and national insurance contributions. As a result, you pay less tax on your salary and other income. Examples are the employed person’s tax credit and the elderly tax credit. Which tax credits apply to you depends on your personal situation.
Personal allowances are expenditures which you may deduct from your taxable income, subject to certain conditions. Examples are maintenance payments, medical expenses, study costs and donations to eligible charities known as Public Benefit Organisations (ANBIs).
Personal allowances are first deducted from your income in box 1 (work and home ownership). If they exceed your taxable income in box 1, the rest is deducted from the tax you pay in box 3 (savings and investments). Any remaining personal allowances are then deducted from your income in box 2 (substantial interests). If your personal allowances exceed the total taxable income in boxes 1, 2 and 3, the excess amount is carried forward to subsequent years.
Cohabitation and income tax
If you are married or in a registered partnership, you are tax partners. If you and your partner cohabit, it depends on your personal situation whether or not you are tax partners. Tax partners may divide certain income and deductible items between them on the tax return.
Tax is partly deducted at source
Part of your income tax is deducted at source in the form of salaries tax and dividend tax. That way you avoid having to pay a large amount of income tax as a lump sum. Salaries tax and national insurance contributions are deducted by your employer or benefit agency. A company which pays dividends to its shareholders deducts dividend tax and remits it to the Tax and Customs Administration.
More information income tax
If you have any questions concerning income tax, please contact the Tax and Customs Administration.