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Income Tax

Income Tax is a tax on your income. Not all income is taxable and you’re only taxed on ‘taxable income’ above a certain level. There are also a number of reliefs and allowances that can reduce your Income Tax bill. In some cases you may not have to pay any Income Tax at all.

Taxable income includes:

  • earnings from employment
  • earnings from self-employment
  • most pensions income (State, company and personal pensions)
  • interest on most savings
  • income from shares (dividends)
  • rental income
  • income paid to you from a trust

There is also income which is never taxable. This includes certain benefits, income from tax exempt accounts, Working Tax Credit (WTC) and premium bond wins. These sources of income are ignored when working out how much Income Tax you have to pay.

Nearly everyone who is resident in the UK for tax purposes receives a ‘Personal Allowance’; this is an amount of taxable income you’re allowed to earn or receive each year without paying Income Tax. This tax year (2010-11) the basic Personal Allowance is £6,475. You may be entitled to a higher Personal Allowance if you’re 65 or over. Click here to see all current Income Tax bands and allowances.

With so many available reliefs and planning measures and a higher rate of tax now set at 50%, not taking the right advice can seriously damage your wealth. Contact Collective Legal Solutions to arrange an appointment with a Chartered Tax Adviser.