Tax in your plan, in more detail

Income tax stacks each person’s income in order: earnings, pensions and guaranteed income first, then interest, then dividends. The allowances for interest and dividends depend on your other income, and the personal allowance shrinks above the taper threshold.

• National Insurance is charged on earnings, never on pensions, and stops at State Pension age. Salary sacrifice lowers the pay it is charged on.
• A draw from a taxable account counts as selling an equal share of everything in it, at its average cost, set by “Bought for”. Any gain meets capital gains tax on the UK bands, in every nation.
• Inheritance tax is estimated once, on what the household leaves after the last year. It sits outside Tax over the plan, and Plan detail gives it under “What happens at the end”.

Enacted changes apply from the year they begin. When the threshold freeze ends, some thresholds rise with inflation and others stay where the law fixes them.

The order money is drawn changes the tax, as a couple’s allowances and bands are used together. Tax-free cash never meets the bands, and how you take your pension decides when it comes out.

The Tax tab covers income tax, and “Show the rules” names the record behind each part of it. The Income & tax chart adds National Insurance and capital gains tax, so its bars add up to Tax over the plan.