Income Tax, unsurprisingly, is a tax on on what you earn.
It is collected by HMRC on behalf of the government, and it helps provide funding for public services such as the NHS, education and the welfare system, as well as investment in public projects, such as roads, rail and housing.
It is a tax on the income of both individuals and non-incorporated businesses. But not all types of income is taxable, so knowing when you need to pay tax - and when you don't - can be a little confusing.
Ashdown Hurrey have provided a useful summary to help explain the main income types that are, and are not, liable to Income Tax.
In most cases, individual taxpayers receive a tax free Personal Allowance which means they are not required to pay tax on all their income. Your Personal Allowance is the amount of money you’re allowed to earn each tax year before you pay any income Tax. For 2018-19 this amount is £11,850. Even within this, there are some variable factors that can affect the amount of the Personal Allowance your entitled to. An example of this is if you claim the Marriage Allowance, which can result in an increase in the amount of Personal allowance. If your earnings exceed £100,000 then you may see your Personal Allowance gradually reduced or even wiped out.
The following lists show the main income types that are and are not taxable.
Taxable income includes:
You don't pay tax on the following:
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