Income Tax

Your income, that is, the money that you have to live from whether earnings or savings, is all potentially subject to tax. Sources of income which are subject to tax include:

• Your earnings (from employment or self-employment)
• Your pension income (whether state or personal)
• Interest earned on savings
• Your income from any shares you own
• Your income from any property you rent out

Benefits subject to tax include:

• Bereavement Allowance
• Carer’s Allowance
• Incapacity Benefit (after twenty-eight weeks)
• Income Support (in some cases, such as when on strike)
• Jobseeker’s Allowance
• Statutory Maternity Pay
• Statutory Sick Pay
• Widowed Parents Allowance

You will not usually need to pay tax on tax-free savings accounts such as ISAs, nor on the following state benefits:

• Attendance Allowance
• Bereavement Payment
• Child Benefit
• Child Tax Credits
• Christmas Bonus
• Cold Weather Payments
• Council Tax Benefit
• Disability Living Allowance
• Guardian’s Allowance
• Housing Benefit
• Incapacity Benefit (for first twenty-eight weeks)
• Income Support
• Industrial Injuries Benefit
• Maternity Allowance
• Severe Disablement Allowance
• Social Fund loans and grants
• War Widow’s Pension
• Winter Fuel Payment
• Working Tax Credit

In order to calculate whether you need to pay Income Tax, you should add together all your taxable income. You do not need to include any non-taxable income. Once you know how much taxable income you have each year, you can see whether your income exceeds the Income Tax personal allowance (see Income Tax Personal Allowance). For more information on the State Pension and State Benefits see The Basic State Pension and State Benefits.