AS a working UK citizen, tax is something you’ll accept will come out of your wage packets each month.
But the amount and type of tax you pay can vary, so being up to date on your tax code and brushing up on useful information is always helpful.
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How much tax should I pay?
If you are an employee you will pay two different types of tax – income and national insurance.
The amount you pay each month can vary depending on the salary you earn and if you receive any other forms of income.
But you do not have to pay tax on all types of earnings including premium bonds, some state benefits and the first £1,000 from property you rent.
National insurance (NI) contributions are taken from your income and pay packet by your employer.
You will only pay NI if you earn more than £183 a week – with the percentage rising depending on your monthly wage.
To calculate the amount you should be paying you can access the gov.uk website for a more detailed estimation.
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How do you calculate tax?
If you earn below £12,500 annually then you will not have to pay any income tax as your earnings are not considered taxable.
However, if you earn more than that figure income tax will be automatically taken from your monthly or weekly earnings.
If your salary is between £12,501 up to £50,000 then 20 per cent of your wages will be taken – this is considered the basic-rate for taxpayers.
But if you are on a salary where you earn between £50,001 and £150,000 you are expected to pay 40 per cent of your earnings towards income tax.
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If you earn anything over £150,000 you will be taxed at 45 per cent.
These figures only relate to England, Wales and Northern Ireland as Scottish income tax rates are different from the rest of the UK.
What is a tax-free amount?
You will not be taxed if you earn under £12,500 a year.
However, this amount may be bigger if you claim certain allowances including, blind person’s allowance, marriage allowance and child tax credit.
You will also not have to pay tax on savings interest, dividends and the first £1,000 of income if you are self-employed.
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How many hours can you work before paying tax?
There is no set number of hours you can work before having to pay tax as it is completely dependent upon your earnings.
For example, if you work 30 hours a week for £8 an hour you will not be expected to pay any income tax as your annual salary is below the taxable limit.
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Do I need to pay tax if I work part-time?
If you have a part-time job the likelihood is that you won’t have to pay any tax.
This is because the amount you earn is likely to be under the £12,500 threshold.
However, if your part-time job pays you more than that figure you may find some of your wages will be taxable for both income tax and national insurance.
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