Your job, savings and your family’s circumstances can all have an impact on the amount of income tax you have to pay each year. Many types of income are taxable, including earnings from your employment, income from your pension, income from property, shares and dividends.
Interest from ordinary savings accounts is largely tax-free for most savers, thanks to the personal savings allowance. For basic rate taxpayers, the personal savings allowance is £1,000 (so the first £1,000 of interest is tax-free). For higher rate taxpayers the allowance is £500. Additional rate taxpayers have no personal savings allowance.
Some types of income are not taxed at all. These include gains or interest made on tax-exempt accounts such as ISAs, winnings from premium bonds or the National Lottery, some state benefits and a few other exceptions.
Income tax is a complex area, particularly if your earnings come from multiple sources or from your own business, and it can be hard to know what you have to declare. Under self-assessment, it is your responsibility to ensure that HMRC receives complete and accurate information about you and your income. Any errors can result in severe consequences, so getting help from a financial adviser or accountant is a good way to ensure peace of mind – as well as a potentially lower income tax bill.
Find a local financial adviser or accountant here.