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Money, tax and benefits

Money, tax and benefits

Taxable and non-taxable income at a glance

Not all income is taxable. You can also receive some normally 'taxable' income 'tax-free'. The lists below will help you to work out what income counts as 'taxable' and 'non-taxable' - and what taxable income you can receive tax-free.

What counts as taxable income?

Income from employment

  • includes income from full, part-time and temporary employment
  • if you get perks or benefits from your employer these may also be taxable

Income from self employment/partnerships

Profits you make from working for yourself as a sole trader or partner.

Pension income

  • State Pension
  • personal or company pensions
  • retirement annuity

Interest on savings

  • bank and building society interest - not including Individual Savings Accounts (ISAs) and Personal Equity Plans (PEPs)
  • National Savings and Investments accounts and bonds

Investment income

Dividends - not including dividend income from ISAs and PEPs.

State benefits

  • Carer's Allowance
  • Jobseeker's Allowance
  • Employment and Support Allowance - 'contribution' based (if you have paid enough National Insurance contributions) 
  • Incapacity Benefit - from week 29
  • Weekly Bereavement Allowance

Rental income

  • from a second property
  • from a lodger if more than £4,250 a year (£2,125 if split jointly)

Other taxable income

  • pensioner bonds
  • trust income

What counts as non-taxable income?

State benefits 

  • Disability Living Allowance
  • Attendance Allowance
  • lump sum Bereavement Payments
  • Pension Credit
  • free TV licence for over 75s
  • Winter Fuel Payments
  • Housing Benefit
  • Employment and Support Allowance - income based (if you haven't paid enough National Insurance contributions)  
  • first 28 weeks of Incapacity Benefit
  • Income Support - certain payments
  • Child Benefit
  • Guardian's Allowance
  • Maternity Allowance
  • Industrial Injuries Benefit
  • Severe Disablement Allowance
  • War Widow's Pension
  • Young Person's Bridging Allowance

Interest on savings

  • all ISAs and PEPs
  • Savings Certificates

Rents 

  • first £4,250 a year from a lodger - £2,125 if split jointly

Tax Credits 

  • Working Tax Credit
  • Child Tax Credit

Premium Bonds

Wins from Premium Bonds are free from UK Income Tax and Capital Gains Tax. If you have income that is not shown above, please contact your Tax Office.

Taxable income that you can receive tax-free

Everyone is entitled to receive a certain amount of taxable income tax-free during the tax year. This is called the Personal Allowance and it increases from age 65.

If you're certified blind and on a local authority register of blind persons, or if you live in Scotland or Northern Ireland and you are unable to perform any work for which eyesight is essential, you can claim Blind Person's Allowance.

As with the Personal Allowance, this is an amount of taxable income you can receive during the tax year without paying tax. 

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