Income Tax is a tax you pay on your income. You don’t have to pay tax on all types of income.

You pay tax on things like:

• money you earn from employment
• profits you make if you’re self-employed
• some state benefits
• most pensions, including state pensions, company and personal pensions and retirement annuities
• interest on savings and pensioner bonds
• rental income (unless you’re a live-in landlord and get £4,250 or less)
• benefits you get from your job
• income from a trust
• dividends from company shares

You don’t pay tax on things like:

• income from tax-exempt accounts, like Individual Savings Accounts (ISAs) and National Savings Certificates
• some state benefits
• premium bond or National Lottery wins
• the first £4,250 of rent you get from a lodger in your home

Income Tax allowances and reliefs

Most people in the UK get a ‘Personal Allowance’ of tax-free income. This is the amount of income you can have before you pay tax.

The amount of tax you pay can also be reduced by tax reliefs if you qualify for them.

Pay As You Earn (PAYE)

Most people pay Income Tax through PAYE. This is the system your employer or pension provider uses to take Income Tax and National Insurance contributions before they pay your wages or pension. Your tax code tells your employer how much to deduct.

Your tax code can take account of state benefits, so if you owe tax on them (eg the State Pension) it’s usually taken automatically from your other income.

Self Assessment tax returns

If your financial affairs are more complex, eg you’re self employed or have a high income, you may pay Income Tax and National Insurance contributions through the Self Assessment system. You’ll need to fill in a tax return every year.

Income Tax on savings and investment interest

Income Tax is usually automatically taken from interest on savings and investments.

Income that’s not automatically taxed

You must fill in a tax return if your untaxed income is over £2,500, or if you don’t pay tax through your wages or pension. You must call HMRC if it’s less than £2,500.

HMRC Income Tax enquiries
Telephone: 0300 200 3300
Textphone: 0300 200 3319
Monday to Friday, 8am to 8pm
Saturday, 8am to 4pm
Find out about call charges

State benefits that are taxable

The most common benefits that you pay Income Tax on are:

• the State Pension
• Jobseeker's Allowance
• Carer's Allowance
• Employment and Support Allowance (contribution based)
• Incapacity Benefit (from the 29th week you get it)
• Bereavement Allowance
• Pensions paid by the Industrial Death Benefit scheme
• Widowed Parent's Allowance
• Widow's pension

Tax-free state benefits

The most common state benefits you don't have to pay Income Tax on are:

• Housing Benefit
• Employment and Support Allowance (income related)
• Income Support - though you may have to pay tax on Income Support if you're involved in a strike
• Working Tax Credit
• Child Tax Credit
• Disability Living Allowance
• Child Benefit (income based - use the Child Benefit tax calculator to see if you'll have to pay tax)
• Guardian's Allowance
• Attendance Allowance
• Pension Credit
• Winter Fuel Payments and Christmas Bonus
• free TV licence for over 75s
• lump sum bereavement payments
• Maternity Allowance
• Industrial Injuries Benefit
• Severe Disablement Allowance
• War Widow's Pension
• Young Person's Bridging Allowance

To work out if you should be paying Income Tax, follow these steps.

1. Add up all your taxable income.

2. Work out your tax-free allowances. Your Personal Allowance and the Blind Person's Allowance (if applicable) will tell you how much you can earn before you have to pay tax.

3. Take your tax-free allowances away from your taxable income.

If there’s anything left, you’re a taxpayer. Contact HM Revenue & Customs (HMRC) if you’re not already paying tax.

If there's nothing left, you shouldn't be paying tax and may be due a refund.

To find out if you’re paying the right amount of Income Tax, use the tax checker on the HM Revenue & Customs (HMRC) website.

You need to be:

• born after 5 April 1948
• a basic or higher rate tax payer
• getting the basic Personal Allowance

You can’t use the tax checker if:

• you’re entitled to claim Married Couple’s Allowance
• you were born on or before 5 April 1948 and get the higher allowances
• your income is over £100,000
• you have other taxable income (eg from dividends and trusts)
• you get taxable state benefits
• you’re self-employed

You also need details of:

• your total earnings for the tax year before tax was taken off
• the total tax paid on your earnings
• the interest from any savings after tax was taken off
• the total tax you paid on savings
• the total amount of any Gift Aid donations you’ve made

The tax checker will give you an estimate.