Income tax
Income tax is a compulsory deduction taken by the government from the earnings of individuals.
Individuals pay tax on their income but some types of income may be exempt.
Tax is payable on the following types of income:
- Earnings from employment;
- Profits made through being self-employed;
- Some state benefits;
- Most pensions, including state pensions, company and personal pensions and retirement annuities;
- Rental income (although this may not apply in some cases of being a ‘live-in’ landlord);
- Job-related benefits, eg a company car, lunch allowance etc;
- Income from a trust, and
- Interest on savings over the stipulated savings allowance.
As at 2019, income tax is not payable on:
- A limited amount of income from self-employment - this is the ‘trading allowance’.
- A limited amount of rental income from property (unless the Rent-a-Room Scheme is being used).
- Income from tax-exempt accounts, e.g Individual Savings Accounts (ISAs) and National Savings Certificates.
- Dividends from company shares under a dividends’ allowance.
- Some state benefits.
- Money won on premium bonds, the National Lottery or the Health Lottery.
- Rent an individual receives from a lodger in their house that is below the Rent-a-Room limit and
- Income Tax allowances and reliefs.
Most people in the UK get a 'personal allowance' of tax-free income. This is the part of their income which they do not have to pay tax on.
The majority of people pay income tax through a system called PAYE (Pay As You Earn) which is used by employers and pension providers to deduct tax and National Insurance Contributions (NIC) directly out of wages and pensions. It is an automatic process and spares many people the complexity of calculating what their tax should be.
For more information on the main types of tax, see Taxation in building design and construction on Designing Buildings Wiki.
[edit] Related articles on Designing Buildings Wiki
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