In the past, an important distinction was made between earned and unearned (or investment) income; unearned being generally the more heavily taxed. Currently, the distinction is of much less significance, being largely of importance only for calculating ‘relevant earnings’ for pension relief purposes, although one may note in passing that it is now earned income that is more heavily taxed, even if one discounts national insurance contributions.

Earned income currently includes:

1employment and pensions income chargeable to tax under the Income Tax (Earnings and Pensions) Act 2003 (see ¶405-000ff.);

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