You won’t have to pay tax on all the money you have coming in, but some of your income will be taxed. Here are some tips about what you should expect to be taxed, and how to cut the cost.
What income is taxed
You may have to pay tax on:
- your earnings from employment or self-employment
- your State Pension
- any annuities you buy
- lump sums taken from your private pensions
- interest from savings accounts
- dividends from shares
- income from lettings
- some benefits, such as Carer’s Allowance and Statutory Sick Pay
- income from a trust.
You don’t have to pay tax on:
- Pension Credit
- Universal Credit
- Attendance Allowance
- Disability Living Allowance, Personal Independence Payment and Adult Disability Payment (Scotland)
- Winter Fuel Payment
- pensions administered under the War Pensions Scheme and Armed Forces Compensation Scheme
- lottery or Premium Bond wins
- industrial injuries benefits
- Individual Savings Accounts (ISAs)
- some National Savings and Investments products.
You can earn up to £12,570 from all your income streams before you start paying income tax. This is called your personal allowance.
Check you’re not missing out on any allowances
You can increase your Personal Allowance by claiming extra allowances.
Married Couple’s Allowance could help to reduce your tax bill if:
- you’re married or in a civil partnership
- you’re living with your spouse or civil partner
- one of you was born before 6 April 1935.
You can work out what you could get here.
If you or your partner were born on or after 6 April 1935, you may be able to claim Marriage Allowance instead. Marriage Allowance lets you transfer £1,260 of your Personal Allowance to your spouse or civil partner. Your income must be under your personal allowance (£12,570). Your partner must also earn more than you.
You can get Marriage Allowance if:
- you’re married or in a civil partnership
- you don’t earn anything, or you earn less than £12,570
- your partner pays Income Tax at the basic rate.
You can still apply for Marriage Allowance if you or your partner:
- are currently receiving a pension
- live abroad – as long as you get a Personal Allowance.
If you are registered blind or severely sight impaired, you can claim Blind Person’s Tax Allowance, which adds £2,870 to your Personal Allowance. Contact HMRC to find out how to apply.
You can transfer all your Personal Allowance to your partner if you don’t pay tax or can’t use all of it.
Reclaim any overpaid tax
Make sure you claim back tax that you shouldn’t have paid. You may have overpaid because too much was taken, or you didn’t claim an allowance. HMRC won’t send you a refund unless you tell them that you’ve overpaid.
Contact HMRC for help and ask them to send you a tax return. You can also claim a tax refund online.
Check your tax code
Your tax code tells your employer or pension provider how much tax to take from your pay or pension. If it’s wrong, you could be paying more tax than you need to.
You can check your tax code from your P45, or online by using the Gov.uk Income Tax checker. You can also use the service to tell HMRC if you think your tax code is wrong.
Complete your tax return and pay your tax on time
Most people don’t have to fill in a tax return. Tax is usually deducted from your pensions and savings automatically.
If you do have to fill in your own tax return, this is called a Self Assessment tax return. Make sure you complete and send it on time. You can do this:
- by post – the deadline to complete and send a paper return by post is 31 October. If you haven’t received the forms in the post, you can download them from Gov.uk
- online – the deadline to complete and return your tax return online is 31 January. If it’s your first time filing your own tax return, or you didn’t send one in the last tax year, you’ll need to register for Self Assessment before you can use the online service.
If you're paying your own Self Assessment tax bill, you'll usually need to make two payments on account every year. You'll need to make the first payment by 31 January, following the end of the tax year, and make the second payment by 31 July.
You can be fined £100 or more, o if you miss the deadline to submit a tax return or pay your bill. You might also be charged interest on late payments. Make sure to get help as soon as possible if you’re finding it difficult to complete your return. You should contact HMRC as soon as possible if you’ve missed your payment or are having trouble paying it on time.
You can appeal against a penalty if you have a reasonable excuse – for example, if you had an unexpected stay in hospital and couldn’t complete your tax return in time.
Tax Help for Older People provides free tax advice for people on lower incomes.
If you want to find out more about tax and how to apply for allowances, visit Gov.uk.