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Tax-free income

  • 2 min read

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 in 2024/25. 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 £3,000
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 £500

Is tax-free income the same as gross income?

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. 

How is income taxed in the UK?

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:

Income Tax rate
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

I’m employed

To find out exactly what’s being deducted from your salary when you’re employed, you can check your payslip. You may also be making pension contributions and paying off a student loan.

I’m self-employed

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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