Sadly, the only certain things in life are death and taxes. It's depressing to think of someone taking a chunk of your hard-earned money, but tax helps pay for stuff for you and others like:
- Healthcare
- Education
- Defence
- Social security
- Transport
What's National Insurance?
National insurance (NI) is your contribution to your government pension fund, so you can live your later years in comfort - or that's the plan anyway.
What's taxable?
- Earnings from work, including tips and bonuses
- Jobseeker's allowance
- Interest on your savings
- Dividends from shares in a company
How do I hand it over?
- If you've got a job, your employer usually gives your tax straight to the tax office
- If you're self employed, you'll need to complete a self assessment tax return and pay the tax office yourself
- Banks and building societies take tax from the interest they pay to savers and hand it over to the government
- If you change jobs, you'll get a P45 from your employer to give to your new boss
How much are they going to sting me for?
- The first £5,035 you earn is tax free
- The next £2,090 is taxed at 10%
- £2,091-£32,400 is taxed at 22%
- Earnings over £32,400 are taxed at 40%
What should I do if they take too much or too little tax?
- At the end of the tax year, you'll receive a P60 form with what you've earned and how much tax you've paid
- If you've paid too much, you'll get a cheque in the post
- And if you've paid too little, they usually increase your deductions in the next tax year
Do I have to keep records?
Yes, it's important. Keep:
- Anything from the tax office
- All your payslips
- Details from the Benefits Agency about any taxable social security benefits you claim
- Info from your bank or building society about any benefits you claim
- Comprehensive records if you've got your own business. See the starting your Own Business section
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