Income Tax is a tax on income. Not all income is taxable and you're only taxed on 'taxable income' above a certain level. However there are reliefs and allowances that can reduce the amount of tax you pay and in some cases mean you've no tax to pay.
Income Tax
Income Tax is the principal form of direct personal taxation in the UK. It takes the form of a proportion of a person's earnings, which is collected by HM Revenue & Customs and passed to the Treasury. It is charged on various sources of income like salaries, pensions, income from self employment and investment income.
Income is classed as Taxable or Non Taxable. Taxable income is the portion of income that is the subject to income tax.
Detailed information on how income tax is calculated, income tax allowances and rates,is available from GOV.UK.
Paying Income Tax
If you are employed the tax will be deducted by your employee under the PAYE scheme. If you have received interest, the tax is usually deducted by the payer.
Not all income is taxable, and there are allowances and reliefs you may be able to claim that can reduce your bill.
The amount of tax free income you can have in a year is called your personal allowance. It depends on your age; and can be affected by the level of your income. For couples one of whom is born before 6 April 1935 there is a Married Couple’s Allowance.
It is possible for some couples to transfer 10% of the personal allowance between them. This is being called the ‘Marriage Allowance’. It is completely different from the Married Couple’s Allowance. HMRC's online Marriage Allowance calculator tells couples instantly how much they could reduce their annual income tax bill by.
Blind people can get an additional allowance called the Blind Person’s Allowance.
An explanation of the Pay As You Earn (PAYE) system and tax codes is available from MoneyHelper.
Claim tax relief for your job expenses
As an employee, you may spend your own money on things that are related to your job. Where this is the case, you may be able to claim tax relief on your expenses
Find out more at GOV.UK.
Tax on your UK income if you live abroad
If you’re a Non UK resident but receive income from the UK you will normally have to pay income tax on that UK income.
Income includes any pension, rental income, savings interest and wages.
More detailed information is available at:
Self Assessment
Self-Assessment is a method of paying income tax to HMRC, usually if you are self-employed, but people with other income may also need to submit a self-assessment tax return .You must always complete and send a tax return if you’re:
- a self-employed sole trader
- a partner in a business partnership
- a company director
- if you earned £100,000 or more in the last year
Full details of who must send in a form, deadlines and penalties are available at GOV.UK.
Detailed advice on all aspects of Self Assessment is available here.
A step by step guides to completing your Tax Return are available at:
A guide "Common self-assessment mistakes" is available from Saga.
Tax refunds and claiming back overpaid tax
If you have paid too much tax, you can claim it back.
For information on how to claim a tax refund follow this link.
To check the amount of Income Tax you should have paid, follow this link.
If you think you are not paying the correct amount of Income Tax or are due a refund, contact your local Tax Office by following this link.
Problems with Income Tax
To find help with your tax affairs and how to challenge a tax decision, click here.
Common Tax Mistakes
Many people are paying the wrong amount of tax. Click here to see the 10 most common Tax mistakes.
Tax Terminology
For an explanation of frequently used words and phrases used in taxation, click here.
Help with Tax Issues
TaxAid is a charity that can help you understand the tax system, pay the correct amount of tax and resolve any issues. They can help with most tax issues affecting individuals, sole traders and partnerships. They have in-house expertise in many specialist areas, including non-disclosure cases and International tax issues for those who are about to leave or have just arrived in the UK.
Tax help for older people is a service provided by Tax Volunteers, a UK registered charity, that provides free, independent and expert advice and help for older people on lower incomes (£20,000 gross a year or less).
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