Tax

You will not 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, how to cut the cost, and help with tax debt.

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If you've been told you owe tax

Tax debt is a priority debt and you need to deal with it as soon as possible. Contact Tax Help for Older People for more information.

What income is taxed?

You may have to pay tax on:

your earnings from employment or self-employment
your State Pension
private pensions, including annuities and lump sums
interest from savings accounts
dividends from shares
rental income
some benefits, such as Carer’s Allowance or Carer Support Payment and Statutory Sick Pay
income from a trust.

You do not have to pay tax on things like:

You can earn up to £12,570 from all your income streams before you start paying income tax. This is called your Personal Allowance.

It’s important to remember that what you pay tax on might change over time. Bereavement commonly triggers changes in tax. For example, you may have to pay Inheritance Tax, Income Tax or Capital Gains Tax.

Another common trigger for changing taxes is getting your pension. This includes if you withdraw money from a pension before you’re 55 – called an unauthorized payment. The rules can be complicated, so contact Tax Help for Older People for advice.

Check you’re not missing out on any allowances

You can increase your Personal Allowance by claiming extra allowances.

Marriage Allowance lets you transfer £1,260 of your Personal Allowance to your partner. Your income must be less than your Personal Allowance. Your partner must also earn more than you.

You can get Marriage Allowance if:

you’re married or in a civil partnership
your income is less than £12,570
your partner pays Income Tax at the basic rate if you live in England or Wales, or at the starter, basic or intermediate rate if you live in Scotland.

If you or your partner were born before 6 April 1936, you might be able to get Married Couples Allowance. This is more generous than Marriage Allowance. You can claim Married Couples Allowance 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.

If you’re registered severely sight impaired (blind), you can claim Blind Person’s Allowance, which adds £3,130 to your Personal Allowance. Contact HMRC to claim.

You can transfer your Blind Person’s Allowance to your partner if you do not pay tax or cannot use all of it.

Reclaim any overpaid tax

Make sure you claim back tax that you should not have paid. You may have overpaid because too much was taken, or you did not claim an allowance.

Use Gov.uk’s online tool to find out how to claim a tax refund, or contact HMRC.

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 on your P45 if you have one, or online by using Gov.uk’s Income Tax checker. You can also use this service to tell HMRC if you think your tax code is wrong.

Complete your Self Assessment tax return and pay your tax on time

Most people do not have to fill in a tax return. Tax is usually deducted from your earnings, pensions and savings automatically. But you’ll have to complete a tax return if any of the following applied in the last tax year (6 April to 5 April):

you were self-employed and earned more than £1,000 (before any deductions)
you were a partner in a business
your total taxable income was more than £150,000
you had to pay Capital Gains Tax
you had to pay the High Income Child Benefit Charge.

You may have to complete a tax return if you had any untaxed income. Visit Gov.uk for more information on who needs to complete a tax return, or use their online tool to check if you need to complete a tax return.

If you need to send a tax return but did not send one last year, you’ll need to register for Self Assessment by 5 October.

If you have to do a 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. You can download a Self Assessment form if you have not received it in the post the forms in the post
online – the deadline to complete and return your tax return online is 31 January.

You’ll need to pay any tax you owe for the previous tax year by 31 January. You’ll also usually need to make two payments on account every year. Payments on account are advance payments toward your tax bill. You’ll need to make the first of these payments by 31 January and the second by 31 July.

You can be fined £100 or more 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 a payment or are having trouble paying 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 could not complete your tax return in time.

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Next steps

Tax Help for Older People provides free tax advice for people on lower incomes.

Visit Gov.uk to find out more about tax and how to apply for allowances.

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