Income Tax is a tax you pay on your income. You do not have to pay tax on all types of income.
You pay tax on things like:
- money you earn from employment
- profits you make if yo are self-employed - including from services you sell through websites or apps (external link)
- some state benefits (external link)
- most pensions, including state pensions, company and personal pensions and retirement annuities
- rental income (unless you are a live-in landlord and get less than the rent a room limit (external link))
- benefits you get from your job
- income from a trust
- interest on savings (external link)over your savings allowance
You do not pay tax on things like:
- the first £1,000 of income from self-employment (external link)- this is your ‘trading allowance’
- the first £1,000 of income from property you rent (external link) (unless you’re using the Rent a Room Scheme)
- income from tax-exempt accounts, like Individual Savings Accounts (external link) (ISAs) and National Savings Certificates
- dividends from company shares under your dividends allowance (external link)
- some state benefits (external link)
- premium bond or National Lottery wins
- rent you get from a lodger in your house that is below the rent a room limit (external link)
Income Tax Allowances and Reliefs
Most people in the UK get a Personal Allowance (external link)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 (external link) if you qualify for them.