Definition
Earned income, not to be confused with winning the lottery or finding a forgotten twenty in your winter coat, refers to the financial rewards derived directly from one’s employment, business endeavors, or intellectual creations. Essentially, if you’re sweating over it, it’s probably earned income.
Types of Earned Income
For those navigating the labyrinth of tax purposes, earned income typically includes:
- Income from Employment: This is your 9-to-5 paycheck, assuming you aren’t a vampire or night guard.
- Income from Trades, Professions, and Vocations: If you’re a plumber, a barrister, or even a mime, the income from your skills falls here.
- Foreign Business Profits: For the adventurous types earning beyond borders.
- Patent and Copyright Income Received by the Creator: For the brainy bunch who pen bestselling novels or invent the next big gadget.
- A Proportion of Annuity Paid to a Retired Partner: Even after retirement, a slice of your business pie continues to generate income.
Tax Treatment
Concerning tax treatment, it’s worth mentioning that during a Mad Hatter’s tea party, earned and [unearned income] might appear quite similar under the spectacles of the current UK taxation system. However, nuances do exist, typically in how various reliefs and benefits apply.
Related Terms
- Unearned Income: Generally refers to income from investments, rental properties, or inheritance - essentially income that comes while one’s pyjamas are still on.
- Taxation: A thrilling journey through the world of levies, duties, and more. Often best accompanied by a stiff cup of coffee.
- Income Tax: The tax on your hard (or smartly) earned money that helps to keep the public sector wheels turning.
Recommended Reading
For those hungry for more knowledge or suffering from insomnia, consider the following scholarly feasts:
- “The Joy of Tax” by Richard Murphy - Makes learning about taxes as enjoyable as your next dental appointment.
- “Taxation for Fun and Profit” - A fictional book that could become a bestseller, teaching you to love and laugh at taxes.
In conclusion, if income involves effort, creativity, or residual business ties, it’s typically earned. Remember, earning your income is much like running a marathon; the finish line is satisfying, especially once you understand where every drop of your sweat is being taxed!
