When do you pay Income Tax?Source: HM Revenue & Customs | | 02/10/2018
Income Tax, unsurprisingly, is a tax on income. To be more specific, it is a tax on the income of individuals and non-incorporated businesses. However, there are some types of income where no Income Tax is payable. We have summarised below some of the main income type that are and are not liable to Income Tax.
In most circumstances, taxpayers will not be required to pay tax on all their income, even if it is all taxable because they receive a tax free Personal Allowance (2018-19: £11,850). There are a number of variables that can affect the amount of the Personal Allowance such as claiming the Marriage Allowance, which can increase the amount of the allowance. Taxpayers earning over £100,000 may see their Personal Allowance gradually reduced or wiped out.
The following lists show the main income types that are and are not taxable.
Taxable income includes:
- Earnings from employment
- Earnings from self-employment
- Pensions income
- Dividend income
- Rental income (unless using the rent-a-room scheme)
- Trust income
- Interest on savings over your savings allowance
- Certain state benefits (including the State Pension).
Non-taxable income includes:
- The first £1,000 of income from self-employment
- The first £1,000 of income from property you rent (not applicable if using the rent-a-room scheme)
- Income from tax exempt accounts such as Individual Savings Accounts (ISAs) and National Savings Certificates
- Dividends from company shares within the dividends allowance (£2,000 for 2018-19)
- Some state benefits
- Premium Bond or National Lottery wins