Income Tax

image404

What is Income Tax?

Income Tax is a tax you pay on your income. You do not have to pay tax on all types of income.

What do you pay Income Tax on?

· money you earn from your job or jobs

· profits you make if you’re self-employed - including from services you sell through websites or apps

· some state benefits

· most pensions

· rental income (unless you’re a live-in landlord and get less than the rent a room limit)

· benefits you get from your job

· income from a trust

· interest on savings over your savings allowance

What don’t you pay Income Tax on?

· the first £1,000 of income from self-employment - this is your ‘trading allowance’

· the first £1,000 of income from property you rent (unless you’re using the Rent a Room Scheme)

· income from tax-exempt accounts, like Individual Savings Accounts (ISAs)and National Savings Certificates

· dividends from company shares under your dividends allowance

· some state benefits

· premium bond or National Lottery wins

· rent you get from a lodger in your house that’s below the rent a room limit

Income Tax allowances and reliefs

Most people in the UK get a Personal Allowance of tax-free income. This is the amount of income you can have before you pay tax.

The amount of tax you pay can also be reduced by tax reliefs if you qualify for them.