You’ll normally have to pay national insurance (NI) and income tax. How much you’re taxed depends on your circumstances and income.
Paying national insurance will help you access certain benefits in the future, such as a state pension and maternity allowance.
If you’re over 16, you need to make an NI contribution every time you’re paid. Here’s how you’ll be taxed in the 2018-19 tax year:
0% on the first £8,424 you earn per year (£162 per week)
And 12% on any earnings between £8,424 and £46,350 per year (£162 and £892 per week)
And 2% on any earnings above £46,350 per year (£892 per week)
Example: Say you earn £18,000 per year. You’re in the middle bracket, so you’ll be taxed 12% on everything after the first £8,424. In other words, you’ll pay 12% of £9,576. This means you’d pay £1,149.12 in national insurance contributions for the year.
To understand income tax, you need to understand your personal allowance. This is the amount you’re allowed to earn in a tax year before you have to pay income tax.
Your personal allowance is set by the government, and can change from year to year. The standard personal allowance is currently £11,850 per year, but yours may be different depending on your situation.
Any money you earn over your personal allowance will have income tax taken off it. How much you’re taxed depends on the tax band – but essentially, the more you earn, the more you’re taxed.
Example: You have a permanent job with a salary of £18,000 per year. Your personal allowance is £11,850 per year, so you’ve gone over by £6,650. Your salary is within the basic rate band, so you’ll be taxed 20% of £6,650. In other words, you’ll pay £1,330 in income tax.
I’ve paid too much tax – now what?
Sometimes, you may end up paying too much income tax. This might happen if you’ve been given the wrong tax code, or if your earnings have gone up and down a lot. Luckily, you can ask for a tax refund (also called a tax rebate).