Tax & National Insurance
Everyone who earns more than £7475 a year - approx £143 a week - has to pay tax (2011/12 figures). It's the Government's way of raising money to pay for essential services such as schools, hospitals, emergency services, armed forces and so on.
If you're 16 or over and earn more than £139 a week (2011/12 figures), you'll usually have to pay National Insurance contributions too. This goes towards pensions and benefits and you start building your entitlement to financial support for times when you can't work - for example, if you're sick or become unemployed, or for when you retire.
How and when is it paid?
If you're working for an employer, Tax and National Insurance contributions are taken from your wages before you get them (and sent to the Government). That way, the money you owe is spread over the year and you don't have to pay it all in one go.
If you work for yourself, you'll be responsible for paying your own tax and National Insurance contributions. You should let HM Revenue and Customs know as soon as you become self employed.
How much will I pay?
You'll pay 12% National Insurance on everything you earn over £139 per week plus 20% tax on everything you earn over £143 per week (2011/12 figures). Your wage slip will show how much your employer has deducted. The exact amount depends on your earnings and personal circumstances.
If you're a single parent or receiving disability funding, you may get more allowances in your tax code meaning you can earn more before you pay tax. Visit www.hmrc.gov.uk for more details.
Do students have to pay tax?
If you’re a student and you earn more than £143 a week during holidays, but you don’t expect to earn more than £7475 in a year, you can complete a form P38 (S) and your employer will pay you without deducting tax. If your employer does deduct tax, you may be able to claim it back.
If you think you might have paid too much tax, check it out using the Student tax checker. You can claim back any tax you have overpaid by following the instructions.
