Types of income for income tax purposes

The following Private Client practice note provides comprehensive and up to date legal information covering:

  • Types of income for income tax purposes
  • The priority rules
  • Employment income
  • Pension income
  • Social security income
  • Trading income
  • Definition of a trade
  • Meaning of a profession
  • Meaning of a vocation
  • Property income
  • More...

Types of income for income tax purposes

The main types of income are:

  1. employment income

  2. pension income

  3. social security income

  4. trading income

  5. property income

  6. savings and investment income and

  7. miscellaneous income

Historically, the application of income tax involved the identification of a source of income followed by establishing that the source fell within one of the Schedules laid out in the Income and Corporation Taxes Act 1988 (ICTA 1988). The act originally divided the classes or kinds of income assessable to income tax under six historic Schedules, A, B, C, D, E and F. In 1996 the Tax Law Rewrite Project was established to rewrite primary direct tax legislation. With the completion of the Tax Law Rewrite Project, the Schedules were entirely done away with, for the purposes of both income tax and corporation tax with the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003), the Income Tax (Trading and other Income) Act 2005 (ITTOIA 2005) and the Income Tax Act 2007 (ITA 2007) setting out the new heads of charges to income tax. The main heads are listed below:

Types of income / main parts of ITTOIA 2005AuthorityReplaced parts of previous Schedules within ICTA 1988
Employment incomeITEPA 2003, ss 1, 6, Pt 3Sch E (income deriving from an office)
Pension incomeITEPA 2003, s 1, Pt 9Sch E
Social security incomeITEPA 2003,
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