PLEASE NOTE: The charity TaxAid advises only those people on low incomes whose problems cannot be resolved with HMRC.

Most types of income are taxable

Income Tax

Income tax is charged on income.  Not all money you get is income (for instance, gifts you receive are not ‘income’, and you do not pay income tax on them).

The following are the main types of taxable income:

  • earnings from employment or self-employment, this includes tips, ‘casual earnings’ and ‘hobbies’ which make money. Income from auction sites such as eBay can be taxable – take advice if this apples to you
  • taxable benefits e.g. Jobseeker’s Allowance, Carer’s Allowance, most Incapacity Benefit and contributions based Education and Support Allowance (but income based ESA is not taxable)
  • pensions – Occupational pensions, personal pensions and annuities and the State Pension (but pension credit is not taxable),
  • rents and other income from property
  • savings Income – Interest, dividends and other investment income (but not ISA accounts). From 6 April 2016, there is a Dividend Allowance of £5,000 and a Savings Allowance of £1,000 (for basic rate taxpayers): these mean that most people will not pay tax on their savings income
  • Income from Abroad (for instance, a foreign pension, rent from a property abroad).

People who are resident in the UK are taxable in the UK on their worldwide income. People who are not resident in the UK are not liable to pay UK tax except on income they get in the UK (for instance, rent from a property in the UK, or work in the UK). However, if you return to the UK after an absence of less than 5 full tax years, you may be considered as having been only ‘temporarily non-resident’ and this may affect your liability to UK.

TaxAid Tip

For more details of what is and what is not taxable look at the Gov.uk website at  https://www.gov.uk/income-tax

Glossary

resident
'resident' has a special meaning for tax purposes. Follow link to section 'Migrant Worker / New to the UK' for details.