Definition
The amount of an individual's annual income on which tax is payable defined as:
The main reliefs are pension contributions and donations to charity. The main allowances are the 'personal allowance' which every individual has (£4,895 for people under 65 in 2005-2006) and the Married Couples Allowance for couples where one spouse is 65 or over.
So someone with Income of £20,000 who has made pension contributions in the year of £1,000 will have total income of £19,000, and his taxable income will be £19,000 less a personal allowance of £4,895 = £14,105.
The amount of tax he has to pay will be determined by the tax bands in operation in the year in question. For 2005-2006, the bands are: