Income Tax is a tax you pay on your income. You do not have to pay tax on all types of income.
Income you typically pay Income Tax on:
- money you earn from employment and benefits you get from your job
- profits you make if you’re self-employed and trading as a sole trader or partnership
- most pensions, including state pensions, company and personal pensions and retirement annuities
- income from renting a property
- some state benefits, but not all
- Interest on savings, over your savings allowance
- Dividends from company shares, over your dividend allowance
- income from a trust
- grants and support payments made to you or your business because of coronavirus as well as Test and Trace Support Payments are also liable to income tax
- some income that you receive from overseas
Some income is not liable to Income Tax, such as:
- you can get up to £1,000 each tax year in tax-free allowances for self employed or rental income. If you have both types of income, you’ll get a £1,000 allowance for each.
- income from tax-exempt accounts, like ISAs and National Savings Certificates
- some state benefits are not liable to Income Tax
- premium bond or National Lottery wins
- rent you get from a lodger in your house that’s below the rent a room limit
For the purposes of Income Tax, your tax will be deducted at source through the Pay as You Earn (PAYE) scheme if you are employed or through a Self Assessment Tax return if you have other sources of income or your tax is more complex. It is important to note that these two systems run separately and liability can be paid by one or the other and in some cases transferred from one to the other, however they are not connected in any robust way.
Most people in the UK have an amount of income that they can have before they pay tax, this is known as your personal allowance. This may increase if you claim marriage allowance or smaller if your income is over £100,000
Some people may qualify for tax reliefs which means that they will pay less tax to compensate for money spend on certain things, such as job expenses or to get back tax due for payments such as pension contributions. Some people may be liable for special charges, such as those with high income who receive Child Benefit
For those completing a Self Assessment, all income liable to Income Tax is added together, your personal allowance applied, and tax reliefs applicable applied to assess your total liability. Deduction is then made for any tax already paid, such as PAYE on employed income
There are different rates of Income Tax, determined by your total income and the tax band that applies. These are the current bands and rates that you will pay for the tax year 2021/22. It should be noted that the bands may be affected by changes to personal allowance, tax reliefs and special charges
|Band||Taxable income||Tax rate|
|Personal Allowance||Up to £12,570||0%|
|Basic rate||£12,571 to £50,270||20%|
|Higher rate||£50,271 to £150,000||40%|
|Additional rate||over £150,000||45%|
HMRC helpline for general enquiries about Income Tax
0300 200 3300
+44 135 535 9022
Monday to Friday: 8am to 6pm
Closed on weekends and bank holidays.
Best time to call:
Phone lines are less busy before 10am, Monday to Friday.