Taxable Income

Taxable income is the term for any income that you have to pay tax on. In many countries – including the UK – not all your income is taxable.

For every taxpayer in the UK, taxable income is your total income (not just from your salary) minus the Personal Allowance. Every earner in the UK is automatically entitled to the Personal Allowance, it’s not something that you need to apply or qualify for. The only time that your Personal Allowance may change is if your earnings exceed £100,000.

In addition to the Personal Allowance, you can also reduce your taxable income by claiming other allowances depending on your situation:

  • You are self-employed you can also claim either expenses or the flat £1,000 Trading Allowance
  • You earn money from renting a room in your own home, you can also claim the Rent a Room Allowance and reduce your taxable income with £7,500

In addition to the Personal Allowance, there are other tax-free allowances available to be claimed depending on whether they are applicable to your means of income. For more information about these tax allowances and how to make your income more tax-efficient, see a longer list on our tax-free income glossary page here!

Frequently Asked Questions

  • How much is the standard tax-free Personal Allowance?

    The Personal Allowance is the amount of tax-free income that everyone in the UK is entitled to receive each year. The Personal Allowance currently stands at £12,570. You will only be taxed on anything that you earn beyond this amount. However, if you earn over £100,000 per annum, your Personal Allowance is reduced by £1 for every £2 you earn above the £100,000 threshold. To that end, once your income reaches £125,140, you lose your Personal Allowance completely.

  • Does selling an investment count as taxable income?

    Any earnings you make from investments, such as stocks, shares and property, are taxable in the eyes of HMRC. You’ll be required to pay Capital Gains Tax if your profit from these assets is over the allowance threshold of £3,000.

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