What is considered income?

gif1

Apologies if the question I am going to ask is silly, but what is considered income when you retire? How is the tax bracket worked out? In addition to what you might be drawing from your pension pot, what else to include as income? Saving, Inheritance, House sale?
I am asking this because I would like to be sure i drop down bracket when i retire.
Thanks in advance

The_Doc

Types of income:

Trading income (self employment)
Employment income including pension and some social security benefits
Rental income from property
Savings interest and dividends
Some other stuff such as income from intellectual property rights

The total of the above generally define the rate at which you pay taxes. They may have individual tax rates and allowances.

So inheritance is not counted as income but may be subject to IHT
House sale income is not counted but will be subject to CGT on the gain if not your main residence

cloud_dog

gif1 wrote: »

Apologies if the question I am going to ask is silly, but what is considered income when you retire? How is the tax bracket worked out? In addition to what you might be drawing from your pension pot, what else to include as income? Saving, Inheritance, House sale?
I am asking this because I would like to be sure i drop down bracket when i retire.
Thanks in advance

You are confusing two different elements here, one being income, and the other being capital; inheritance and house sales are not categorised as 'income' generally.

The_Doc has summarised most elements of income, the only thing I would add is that any monies extracted/paid from an ISA are excluded from income tax calculations (irrespective of how they may have been derived, i.e. dividend payment etc).

atush

Dont forget there are allowances for income from savings and dividends that would not be included in income unless you are over the allowance.

Dazed_and_confused

Dont forget there are allowances for income from savings and dividends that would not be included in income unless you are over the allowance

That's not true. Savings interest and dividend income which was taxable before introduction of the "Personal Savings Allowance" and "Dividend Allowance" remains taxable income and needs to be included in any tax calculations. Depending on personal circumstances some savings and dividend income may be taxed at 0% rates but they remain taxable income.

Someone with salary of £50,000 and dividends of £5,000 will pay no tax on the dividends (in the current tax year) but if they are in a family receiving child benefit they would be liable to the High Income Child Benefit Charge as their income is £55,000 not £50,000.

Terron

cloud_dog wrote: »

You are confusing two different elements here, one being income, and the other being capital; inheritance and house sales are not categorised as 'income' generally.

House sales can be income - if your job involves trading them, e.g. a property developer. Not likely if you are retired, of course.

cloud_dog

Terron wrote: »

House sales can be income - if your job involves trading them, e.g. a property developer. Not likely if you are retired, of course.

Yes, that is why I used the term 'generally', as in what one might reasonably expect in the usual circumstances.