You do not pay tax on all your income. HM Revenue and Customs gives us all 'allowances', which are deducted from our earnings before tax is calculated. Tax is only due on the balance.
When calculating taxable income you need to include any taxable benefits you receive, such as Jobseeker's Allowance (JSA) paid during periods of unemployment and any interest from savings, as well as earnings from employment or pensions (including any State Pension) and taxable profits from self-employment.
The tax-free allowances you are entitled to are then deducted from total taxable income before the amount of tax payable is calculated. You will only have to pay tax on the amount over and above these allowances.