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Tax on investment income varies in the UK. What you pay depends on the type of investment you make money from. Here is a list of taxable investments:
But there are also tax-free allowances that affect how much you have to pay.
Folks, things have changed. After November’s Autumn Budget, some changes (and freezes) to personal tax rates and thresholds have been announced, including CGT, Income Tax, National Insurance, Inheritance Tax, Dividends and more. Check out our blog to learn about the changes in detail.
In the UK, you pay different types of tax depending on your different sources of income.
Income tax is the main tax you pay on your earnings. In the 2022/23 tax year, the rates are as follows – but be aware that basic rate is due to go down to 19% by 2024:
|Up to £12,570||0%||Personal allowance|
|£12,571 to £50,270||20%||Basic rate|
|£50,271 to £150,000||40%||Higher rate|
|over £150,000||45%||Additional rate|
When it comes to calculating your tax, you should first add up all the income you’ve earned (minus allowable expenses) and work out the rate at which you’ll be taxed. You can calculate Income Tax based on this – your overall income. But you’ll only need to work this out yourself if you’re self-employed and not paying tax via PAYE.
Then when it comes to your investments, you’ll be taxed separately on your income from them individually.
You’re taxed according to what you invest in and, of course, what you earn profit from.
This is included in your overall income and taxed via Income Tax. The only reason you’d need to do a tax return from savings interest earnings is if you’ve earned over £10,000.
Like with the savings’ interest, your pension is taxed via Income Tax.
When you rent a property, you pay Income Tax on the profits that exceed the relevant allowances. If you sell your property, you’ll be liable to pay Capital Gains Tax on any profits that exceed the Capital Gains Tax allowance.
On this, you pay Dividend Tax. When you earn between £2,000-£10,000, you can call HMRC who will change your tax code for you. You’ll then pay tax via your salary or your pension. If you earn over £10,000 through dividends, you’ll have to pay via a Self Assessment tax return.
Click here for more information on dividend rates.
As you might expect, you’ll pay Capital Gains Tax on your profits from shares or property over £12,300.
If you have to do a tax return to pay tax on your investment income, you’ll have to make sure that you register for Self Assessment by 5th October in any given year.
This lets HMRC know that you are earning untaxed income that you’ll need to be billed for after the tax year ends. You should pay this tax bill by 31st January.
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