How much tax and National Insurance contributions do you have to pay?
Q. How much tax do you think you’ll have to pay – 10%, 20%, 50%?
A. The more you earn, the more you pay.
You don’t pay any tax on the first £5,035 you earn because that’s your Personal Allowance
10% on anything you earn between £5,035 and £7,185
After that, you pay 22% on your earnings up to £33,300 a year.
People who earn more than £33,300 pay 40% on anything they earn over that – they are called ‘higher rate’ taxpayers.
Q. Think of a bank manager or a hairdresser, a pilot or a taxi driver. Which of them do you think might pay tax at 40%?
A. It could be any or all of them! They just have to earn enough.
Q. How much National Insurance do you think you’ll have to pay?
A. Like tax, you don’t start paying until you earn £97.01 a week but then the more you earn the more you pay.
National Insurance is different from tax because it has something called the ‘Lower Earnings Limit’ which is £84 a week or £364 a month. If you earn between £84 and £97 a week, or £364 and £420 a month your National Insurance contributions record is credited with contributions even though you have not paid any.
Let’s have a look at a case study to see how much tax and National Insurance Brian pays after he leaves school and starts work at a local supermarket.
