What is tax free?


21 Mar
21Mar

Certain benefits are non-taxable, so can be ignored for tax purposes- CitizensAdvice

It is assumed that the Jobs Protection Grant announced by the Chancellor on 20th March 2020, as part of the Government's Coronavirus business support package, will be treated as a non-taxable benefit when it is paid out to employers, but that the underlying wages that have been paid to 'furloughed' employees will remain liable to income tax:

  • Attendance Allowance
  • Lump sum bereavement payments
  • Bereavement Support Payment
  • Best Start Grant
  • Child Benefit. While Child Benefit is not taxable, if your household receives it and someone in your household has taxable income of over £50,000, they may have to pay extra tax from 7 January 2013. Find out more about the extra tax charge on GOV.UK.
  • child dependency additions paid with Carer’s Allowance, Incapacity Benefit, State Retirement Pension and Widowed Parent’s Allowance
  • Child Tax Credit
  • Christmas bonus for pensioners
  • Cold Weather Payments
  • Council Tax Reduction
  • Disability Living Allowance
  • Employment and Support Allowance (Income-related)
  • Funeral Support Payment
  • Guardian’s Allowance
  • Health costs, including eye tests, prescriptions, travel under the Hospital Travel Costs Scheme
  • Housing Benefit
  • Income Support, unless you are on strike when you claim
  • Industrial Injuries benefits including Disablement Benefit, Reduced Earnings Allowance, Constant Attendance Allowance and Exceptionally Severe Disablement Allowance
  • Maternity Allowance
  • One-parent Benefit, only available if your claim was made before April 1997
  • Pension Credit
  • Personal Independence Payment
  • Return to Work Credit
  • Severe Disablement Allowance, only available to claimants who were claiming before April 2001
  • Social Fund payments including budgeting loans, funeral expenses payments and Sure Start Maternity grants
  • Universal Credit
  • War Disablement Pension, including allowances
  • War Widow’s/Widower's pension
  • Winter Fuel Payments
  • Young Carer Grant.

Other types of income which are non-taxable and can be ignored for tax purposes include:

  • adoption allowances paid by a local authority or approved adoption agency
  • Child Tax Credit
  • childcare vouchers up to a value of £55 a week
  • work-related training courses
  • educational grants and student loans, including the parental contribution and scholarships
  • Education Maintenance Allowance (there are separate allowances for England, Wales, Scotland and Northern Ireland)
  • eye tests, prescription charges and help with other health costs
  • fares to school
  • Higher Education Student Support grant (there are separate grants for England, Wales, Scotland and Northern Ireland)
  • HM forces – mess and ration allowances
  • foster care receipts below specified limits
  • bravery awards – annuities and additional pensions paid to holders of the Victoria Cross, George Cross and most other bravery medals are non-taxable
  • holocaust victims – compensation
  • home improvement grants from your Local Authority
  • hospital patients’ travelling expenses under the Hospital Travel Scheme
  • housing grants from your Local Authority
  • compensation or damages awarded for personal injuries whether received in one lump sum or over a period and whether awarded by a court or out of court settlement
  • interest up to the time of judgment awarded by a court on compensation or damages for personal injuries
  • jurors’ financial loss allowance, if the juror is an employee
  • life assurance policies – certain bonuses and profits
  • long service awards to employees after 20 years of service, where the gift does not exceed £50 for each year of service and where the gift is tangible, for example a clock or shares in a company. A cash award is usually taxable unless it is a one-off payment which is not included in your contract of employment
  • maintenance payments received from a spouse or civil partner
  • miners’ free coal or cash in lieu of coal
  • certain pensions. Voluntary pensions which are not connected to a past job and to which you contribute annually are tax-free. Disability pensions of members of the armed forces are tax-free. Any pension awarded to you as an employee on retirement because of an injury at work is tax-free
  • German and Austrian annuities and pensions for victims of Nazi persecution
  • lump sum pension payments (maximum 25% of the capital value up to a certain limit
  • compensation and interest for mis-sold personal pensions taken out between 29 April 1988 and 30 June 1994 inclusive
  • insurance benefits paid to you if you are sick, disabled or unemployed to meet your financial commitments, for example, benefits paid under mortgage protection insurance, permanent health insurance, payment protection (creditor) insurance and long-term care insurance
  • strike pay and unemployment pay from trade unions
  • premium bond prizes, winnings from the National Lottery and football pools, and from betting for example, horse racing
  • property income - the first £1,000 of income from renting out part of your property is tax-free, for example renting a parking space on your drive (this is separate to the Rent a Room scheme)
  • purchased annuities – capital element of the amount you receive
  • the first £30,000 of payments which are compensation for loss of a job, including statutory and contractual redundancy payments and, in certain cases, a lump-sum payment in lieu of notice.

By the publications team at: Contracts-Direct.com

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