Income tax is simply a tax on an individual’s earnings. An individual’s earnings are typically either income from employment or profits from being self employed.
Other forms of income are also subject to income tax including:
- Savings interest
- Rental income
- Employee benefits
- State benefits
Some forms of income are specifically excluded from an income tax liability including:
- Individual Savings Accounts (ISAs)
- National Savings Certificates
- Premium bonds
- National Lottery winnings
Income tax was introduced in the UK in December 1798. William Pitt the Younger needed to pay for weapons and equipment in preparation for the Napoleonic Wars.
Income tax is collected by HMRC, a government organisation responsible for collecting all taxes in the UK.