The short version: Taxable income is the portion of your earnings that actually gets taxed. It’s your total income minus allowances, reliefs, and deductions.
What counts as income?
Employment income, self employment profits, rental income, pension income, investment income, dividends, savings interest, and most other ways you receive money. Different types of income can be taxed at different rates.
How do you calculate it?
Add up all your income sources. Subtract your Personal Allowance and any other allowances that apply. What’s left is taxable. Different bands then determine what rate you pay.
What reduces taxable income?
Pension contributions, certain reliefs, allowable business expenses if you’re self employed, and various allowances depending on your income sources.
Is it the same as gross income?
No. Gross income is everything before deductions. Taxable income is what’s left after allowances. Your tax bill is based on taxable income, not gross.
Want to understand how your taxable income is calculated? We can break it down for you.
