Income tax is a type of tax that the UK government collects from the money people earn, such as wages, salaries, and other types of income. But who exactly needs to pay it?
In the UK, most adults who earn money have to pay income tax. If you have a job, your employer usually takes the tax out of your paycheck before you even see it, through a system called PAYE (Pay As You Earn). This means you don’t have to worry about calculating your tax every month. However, if you work for yourself, like a freelancer or a small business owner, you must calculate and pay your tax through a process called self-assessment.
Not everyone pays the same amount. The government gives each person something called a “personal allowance,” which is an amount of money you can earn each year without paying any income tax. For example, if the personal allowance is £12,570, and you earn less than that, you won’t pay any income tax. However, if you earn more, only the money above that limit is taxed.
There are also specific situations where you might not pay income tax. Some people, like those on very low incomes, might not earn enough to be taxed after their personal allowance is considered. Additionally, certain benefits, grants, or scholarships may not be counted as taxable income.
In summary, if you live in the UK and earn money, you are generally required to pay income tax once your income exceeds the personal allowance threshold. Whether you work for an employer or run your own business, knowing about income tax helps you understand how the government funds services like schools, hospitals, and roads. This system ensures that everyone contributes their fair share based on what they earn.
If you’re uncertain, call our tax accountants or send us an email for further clarification.
