Tax-free income is income that you earn on which you’re not liable to pay tax.
There are lots of allowances that you can claim in the UK. Here’s a quick snapshot of some commonly claimed 2023/24 tax allowances:
AllowanceWho can claim?How much? (2022/23)Personal AllowanceAnyone earning less than £125,140£12,570Trading AllowanceAnyone who earns self-employed income£1,000Capital Gains Tax AllowanceAnyone making profit from selling assets£6,000Marriage AllowanceSpouses/civil partners – one earning >£12,500, the other >£50,270Unused Personal AllowanceProperty AllowanceLandlords, most often buy-to-let landlords£1,000Rent a Room scheme Live-in-landlords£7,500Dividend AllowanceAnyone who’s earned dividends£1,000
No. Tax-free income is money that you’re not liable to pay tax on. Gross income, in comparison, is your total income before tax has been deducted.
Whether you’re employed or self-employed, you will have to pay Income Tax and National Insurance on what you earn.
Income Tax is the standard tax on our wages. National Insurance entitles us to certain state provided benefits such as the state pension.
Take a look at what rate your income will be taxed:
IncomeTax rateUp to £12,5700%Personal Allowance£12,571 to £50,27020%Basic Rate£50,271 to £125,14040%Higher RateOver £125,14145%Additional Rate
To find out exactly what’s being deducted from your salary when you’re employed, you can check your payslip. You may also be making pension contributions and paying off a student loan.
If you’re self-employed, you’ll find these details on your tax return. As standard, you’ll need to pay Income Tax, student loan (if applicable) and National Insurance on your tax return. If you want to make private pension contributions, you’ll have to arrange this yourself.
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