What tax do I have to pay if I work in the UK?

What taxes do I have to pay in the UK

This article was written by the Great British Mag content team on 31 March 2021.

Thinking of getting a part-time job while you study in the UK? Or maybe you’re about to graduate and are planning to stick around and start your career here? If so, you might be liable for certain taxes. Here’s what you need to know. 

What taxes will I need to pay on my wages? 

If you’re employed, you’ll notice on your payslip that PAYE (pay as you earn) tax is deducted automatically from your wages. This is split into two types of taxes.

Income tax

This is taken by Her Majesty’s Revenue and Customs (HMRC) and goes towards funding things like education, health and public transport. It’s paid on money you earn from a job (whether you’re employed or self-employed) or receive from other sources like renting out a property.

If you’re employed, it will be automatically deducted from your payslip. If you’re self-employed, you’ll have to file your own tax return and pay the sum owed at the end of each financial year. 

Income tax is currently 20% of whatever you earn after your tax-free allowance (we’ll get to that later) and up to £37,700. If you earn over that amount, you still pay 20% on the first £37,700 of your pay, but 40% on the rest, up to £150,000. Then it’s 45% on anything over £150,000.

In short, the more you earn, the more you pay.

National Insurance Contribution

This tax is also automatically deducted from your pay (if you’re employed) and goes toward funding things like job seeker’s allowance, maternity pay and pensions. It might appear on your payslip as NI Contribution. 

Most workers fall into ‘class A’ for this tax. This means you pay nothing on the first £792 you earn each month, 12% on anything more than that up to £4,167, then 2% on any remaining pay over that.

What is a tax-free allowance?

This is the amount of money you can make in the UK without paying any tax. As of April 2021, the tax-free allowance is £12,570. This means that you won’t be taxed at all if your annual earnings are below that number. If your salary is higher, you’ll only be taxed on the remaining amount you make after the first £12,570. 

Council tax

Council tax is paid by people in the UK and covers the cost of services and amenities in their local area, such as rubbish collection, libraries the police and the upkeep of public parks. Full-time students who live in student households don’t have to pay it in the UK so you might not have come across it before – but as soon as you leave education you are liable to start paying it.

It’s is paid to the local authority, who usually bill you annually, although you can set up monthly payments. The amount you pay is calculated by the local authority based on the property you live in (each house belongs to a ‘band’, and you can check your band on the government’s website) and the number of permanent adult residents who live there. If you live alone, you’re entitled to a discounted rate. 

In Northern Ireland, council tax is called ‘Rates’.

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