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Home : Tax Guide : Tax Free Guide

What is tax-free income?

Income that is free from taxes includes special allowances and reliefs.

1. Allowances
Everyone in the UK has allowances they can use to reduce the amount of income tax payable on the annual income. When you do your self-assessment, you have a basic personal allowance that you can deduct from the amount of your gross income. There are also allowances for the blind and for married couples over the age of 65. All of these reduce the amount of tax that you have to pay.

2. Reliefs
If you have certain expenses connected with your work, then you can also claim reliefs in addition to the allowances. They also include monetary donations that you make to charity.

Tax free income is not extra income. It is a process of deducting money from your gross income on which you do not have to pay taxes.

3. What is tax exempt income?
There are some types of income that are exempt from taxes in the UK . This includes the interest that you receive on some types of savings accounts, such as:
  • Tax Exempt Special Savings Accounts: TESSA
  • The first £70 you earn in interest from a National Savings Bank Account
  • National Savings Certificates
  • Save as your earn programs
  • Interest on a loan
  • Interest on Personal Equity Plans that does not exceed a withdrawal of £180 per year
  • Individual Savings Accounts

[Go Back to UK Tax Guide]

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