Taxable income

Taxable income is the total income that an individual taxpayer pays tax on.
Every UK taxpayer gets a personal allowance of £12,570 for the tax year 2021-22 (£12,500 for 2020-21). It means tax is due on total income, less personal allowance. Personal allowance starts reducing for taxpayers earning income over £100,000.

Besides the personal allowance, there are many other allowances and tax reliefs available, for example:

• Dividend allowance, first £2,000 of dividend income is tax-free
• Capital gains tax allowance
• Rent a room relief
• Marriage allowance
• Blind person allowance

Examples of taxable income in the UK

• Salaries and wages including, bonuses, tips, holiday pay, sick pay, redundancy payments over £30,000
• Pensions income
• Property income
• Capital gains
• Investment income, including dividend income, interest income
• Self-employment profits
• Benefits-in-kind

Tax rates and payments

The United Kingdom uses a “progressive tax rate” structure. The level of tax charged rises as the amount of the individual taxable income increases. The basic rate is 20%, and the higher rate is 45%

The income tax sometimes is deducted at source from your income, like salaries and other times you pay it via self-assessment, as in the case of property and dividend income.