How Much Tax and NI will I Pay
National Insurance is an integral part of the UK tax system, and both employees and employers pay for it. It covers important things like healthcare for all of us, maternity leave, and more. National Insurance contributions can be deducted from a worker’s pay in order to avoid the taxman taking any further interest in their earnings.
Your payslip will show your contributions and the percentage to which you are contributing to National Insurance, which is deducted from your wages before they are paid.
What is Tax?
During each tax year, you pay Income Tax according to how much of your income falls within each tax bracket and how much of your income is over your Personal Allowance.
It is possible to earn income tax-free in some situations. Aside from these, it is also possible to pay fewer income taxes if you are eligible for some tax reliefs or if you claim Marriage Allowance.
What is National Insurance?
The British welfare state is essentially based on National Insurance. Paying National Insurance contributions establishes a worker’s right to state benefits, which are then passed on to the worker’s family.
Employees are currently required to pay contributions from 16 years old until they are eligible for the State pension. A person earning up to the Lower Earnings Limit is required to contribute to the Social Security system. The value of the LEL is reviewed annually. A percentage of self-employed people’s net income, which is reviewed periodically, is added to a fixed weekly or monthly payment. Additionally, people may voluntarily contribute to maintaining benefits eligibility by filling in gaps in their contribution records.
Eligibility for National Insurance
A National Insurance number is required if you intend to work. If you do not already have one, you can apply for one. If you are entitled to work in the UK, you can start working without a National Insurance number. The EU Settlement Scheme does not require a National Insurance number.
If you have the right to work in the UK and reside in the country, you can apply for a National Insurance number.
Applicants must be seeking employment or have been offered a job in the UK. You may still apply if you have already begun working.
However, you cannot apply if you:
- Lost your National Insurance number;
- Are under 19 years of age and have not yet contacted HMRC;
- Obtain a biometric residence permit (BRP) that carries a National Insurance number; or
- The only reason you are applying for a National Insurance number is to apply for benefits or student loans.
- Lost National Insurance number
If you have lost your NI number, there is no need to apply for a new one again. You may check your payslip, P60 form, or any letters pertaining to tax, pensions, or benefits. These documents have your NI number in them.
In case you have lost it, and none of this document carries your NI number, you may fill out form CA5403 and have it mailed to the address written in the form, or contact HMRC National Insurance helpline directly to have them help you in retrieving your lost NI number.
- UK residents aged 19 or below
If you live in the UK and your parents (or a legal guardian) have filed a child benefit claim form for you, then you should receive your National Insurance number automatically 3months prior to your 16th birthday.
The decision you make regarding your status if you are between 16 and 19 and didn’t receive a National Insurance number depends on whether you applied for Child Benefits.
If your parents or guardians filled out a Child Benefit claim form for you, or if you’re unsure, call HM Revenue and Customs (HMRC). National Insurance records may already be on file.
If you were not personally given a National Insurance number by your parent or guardian, you could apply for one online.
- If you have a Biometric Residence Permit (BRP)
In some cases, people with BRPs may already have a National Insurance number—this number will be printed on the back of your BRP.
In order to work, you need to apply for a National Insurance number. This can only be done when you’re in the UK.
- Applying for benefits of student loan
The application for benefits and student loans does not require a National Insurance number. If you are eligible for benefits or if you receive a student loan, you’ll receive a National Insurance number.
Tax and National Insurance Payment
Your income and employment status determines the amount of tax and national insurance you pay to HM Revenue and Customs. Taxable income is any income you receive, including wages, pensions, dividends and benefits. This can include income from employment or self-employment.
In the UK, most people receive a Personal Allowance or tax-free income. This is the income to which you are not subject to taxation.
If you qualify for tax relief, your tax bill can also be reduced.
A pension contribution, a donation to charity, maintenance payments, and time spending aboard a ship outside the United Kingdom are all eligible for tax relief. Depending on the type of tax relief, you may get it automatically or by application.
Your National Insurance contribution and tax payment for each tax year will depend on your income and the allowable deductions you qualify for. The computations can be tricky, so make sure that you are paying your taxes correctly by consulting a professional who can do your taxes for you.