With the Government seeing fit to make HM Revenue and Customs a payer of benefits (pension credit etc.) as well as a collector of taxes, it is no wonder that people are becoming confused as to which sources of income are taxable and which are not. It is particularly confusing for pensioners, who receive pensions, annuity income and various sorts of investment income.
Here is a short guide on what income is taxable and what income is not. Whilst it covers the most usual sources of income, it is not a complete list.
There are many other benefits, both means-tested and not means-tested. Some are taxable and some are not. If you receive a benefit and are not sure whether it is taxable or not, consult HM Revenue and Customs..
There are also quite complex rules in some cases (especially as relates to rental income) as to how the taxable amount is calculated, so just knowing that something is or is not taxable is often of little use in knowing what figure to put on the tax return.
Following changes to the pensions regime which came in in 2015, the taxation of pensions has become considerably more complex, althoguh the taking of 25% of the pension fund as a lump-sum is tax-free.
Many pensioners do not receive tax returns and therefore have no way of knowing whether they are paying too much or too little in income tax. However, the responsibility for making sure that the tax paid is correct lies completely with the taxpayer under the self-assessment system. If you have any doubts as to whether your tax affairs are correct or not, contact us.