The short version: Income Tax is the tax you pay on your earnings. Salary, self employment profits, rental income, pension income. If you’re making money, chances are Income Tax applies to some of it.
How much do you pay?
Everyone gets a Personal Allowance, a chunk of income you don’t pay tax on. Above that, tax is charged in bands. Basic rate, higher rate, additional rate. The more you earn, the higher the rate on your top slice of income. Check gov.uk for current thresholds and rates.
What’s taxed and what isn’t?
Most regular income is subject to Income Tax: wages, business profits, rental income, most pensions, some benefits. But some things are taxed differently. Profits from selling assets are subject to Capital Gains Tax instead, which has its own rates and allowances. Dividends have their own tax rates too.
How do you pay?
Employees pay through PAYE. Your employer deducts tax before you receive your wages. Self employed people and those with other untaxed income pay through Self Assessment, filing a return and settling up by 31st January.
Not sure how much Income Tax you’ll owe? Get in touch and we’ll help you work it out.
