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Tax-free income is income that you earn on which you’re not liable to pay tax.
There are lots of allowances that you can claim in the UK. Here’s a quick snapshot of some commonly claimed 2023/24 tax allowances:
|Allowance||Who can claim?||How much? (2022/23)|
|Personal Allowance||Anyone earning less than £125,140||£12,570|
|Trading Allowance||Anyone who earns self-employed income||£1,000|
|Capital Gains Tax Allowance||Anyone making profit from selling assets||£6,000|
|Marriage Allowance||Spouses/civil partners – one earning >£12,500, the other >£50,270||Unused Personal Allowance|
|Property Allowance||Landlords, most often buy-to-let landlords||£1,000|
|Rent a Room scheme||Live-in-landlords||£7,500|
|Dividend Allowance||Anyone who’s earned dividends||£1,000|
No. Tax-free income is money that you’re not liable to pay tax on. Gross income, in comparison, is your total income before tax has been deducted.
Whether you’re employed or self-employed, you will have to pay Income Tax and National Insurance on what you earn.
Income Tax is the standard tax on our wages. National Insurance entitles us to certain state provided benefits such as the state pension.
Take a look at what rate your income will be taxed:
|Up to £12,570||0%||Personal Allowance|
|£12,571 to £50,270||20%||Basic Rate|
|£50,271 to £125,140||40%||Higher Rate|
|Over £125,141||45%||Additional Rate|
If you’re self-employed, you’ll find these details on your tax return. As standard, you’ll need to pay Income Tax, student loan (if applicable) and National Insurance on your tax return. If you want to make private pension contributions, you’ll have to arrange this yourself.
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