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Income Tax

Income Tax is a tax that you pay on earnings from activities that are regular in nature — for example, working as an employee, working as a self-employed contractor, earning rent, etc.

For most of these types of income, you might also need to file a Self Assessment tax return so you can declare them and pay tax – except for the salary, where your employer will deduct your taxes for you automatically.

Also, you only have to pay tax on the income above your Personal Allowance, which is a tax-free allowance that everyone in the UK has. In the 2019/2020 tax year, the Personal Allowance is £12,500.

Other types of earnings are taxed differently — for instance, if you buy an asset and sell it for a profit, then you pay Capital Gains Tax instead. You don’t add these earnings together — they have their own tax rates and allowances.

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