What you need to know about income tax

Income tax is the tax you pay on your income. However, you do not have to pay tax on all types of income.

What do you have to pay tax on?

·      Money you earn from employment

·      Profits you make if you’re self-employed –including from services you sell through website or apps

·      Some state benefits

·      Most pensions, including state pension, company and personal pensions and retirement annuities

·      Rental income

·      Benefits you get from your job

·      Income from a trust

 

What don’t you have to pay tax on?

·      Interest on savings under your saving allowance

·      Income from tax-exempt accounts

·      The first £5,000 of dividends from company shares

·      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

 

How to pay your Income tax

PAYE

PAYE is the system an employer or pension provider uses to take Income Tax and National Insurance contributions before they pay your wages.

Self Assessment

If your financial affairs are more complex or if you have a high income you may be required to pay Income Tax and National insurance through a Self Assessment.

 

For expert advice on income tax contact us now