Tax exemption

In the past couple of years, a common delusion has arisen according to which in the United Kingdom, self-employed people would be granted a full tax exemption during the first year of doing business. This is, of course, a misconception. The reason as to why you may not pay taxes during the first – mostly partial – year is your Personal Allowance.

Most people in the United Kingdom get a personal allowance of tax-free income.

Normally, this amount, which is a part of income you don’t need to pay tax on, changes every year.

The amount of the tax exemption threshold varies depending on the age and the total annual income, which includes all taxable sources of income, such as pension, or any interest of investments and savings, before tax deductions.

Example:
If in the tax year of 2015-2016 you earned £18,400, and you have no other sources of income, you will not be taxed on £11,000, only on the remaining £7,400.

Personal Allowance per tax year: