What Types of Income is Taxable?
Income tax is an amount that you pay on your income. There are few types of income which is not accountable for tax i.e. non-taxable but most of income types are taxable in the UK. So, what types of income are taxable? Find out about it all on the following points.
In the tax terms, the taxable income is the one where you have pay tax on it. The taxable income includes:
- Wages and salaries from full, part-time, and temporary employment including holiday pay, benefits and tips
- Profits if you are self-employed
- Pensions including occupational pensions, personal pensions, retirement annuity policies and state pensions (pension credit is not taxable)
- Benefits in kind like company cars and private medical insurance. Sometimes, these benefits depend on your income whether it is £8,500 annually or more.
- Expenses paid by the employer including travelling expenses between your home and workplace and expenses for the care of the family members
The UK provides state benefits for the residents in the UK. There are some state benefits which are taxable as well as non-taxable. Here is the list of state benefits that are taxable.
- Jobseeker’s Allowance, Carer’s Allowance, contributions based employment and Support Allowance (but income based ESA is not taxable)
- Incapacity Benefit (from the 29th week, you will get it)
- Pensions paid by the Industrial Death Benefit scheme
Savings and Investment Income
- Widowed Parent’s Allowance
The interest on savings is also regarded as taxable income. Here are following types of interest on savings and investment where tax is deducted.
- Interest paid on savings from bank and building society accounts
- Dividends paid on company shares
- Interest on National Savings and Investments (NS&I) products like Income Bonds, the Investment Account, Guaranteed Income Bonds and Guaranteed Growth Bonds
- Interest from savings deposits with credit unions
- Taxable gains on life assurance policies or investment bonds
- UK Government stocks, or gilts, interest
Other Sources of Income
- Both interest and dividends from UK unit trusts or Open-Ended Investment Companies
- Trust or settlement income
- Profit from renting a property in foreign countries including second homes and from furnished holiday lettings
- Income paid to the estate of a deceased person
- Jurors' financial loss allowance, if self-employed
- Motor mileage allowance profits paid to volunteer drivers
All these types of incomes are taxable. Hence, it is important to know these taxable incomes if you are to start a business or self employed or work under some company.