How Much Is Tax?

You pay tax on everything from your income to your groceries.  However, everyone in the UK pays a slightly different amount of tax.

So, our guide looks at the three main types of tax that you pay and what the current tax rates are.

Income Tax

There are four rates of income tax in the UK: 0%, 20%, 40% and 50%.

The amount of tax that you pay depends on the personal allowances that you receive and the amount that you earn.

The vast majority of taxpayers are allowed to earn a certain amount each tax year without paying any tax (your ‘personal allowance’.  In the 2011/12 tax year, this amount is £7,475.  However, you may also receive other allowances based on your age, if you are married or if you are registered blind.

You then pay 20% tax on the next £35,000 of your earnings over your personal allowance, 40% of the next £150,000 and 50% of any amount above this.

National Insurance contributions

The amount of National Insurance contributions you pay depend on your earnings and whether you are employed or self-employed.

Employed

If you earn under £139 per week, you won’t pay any National Insurance contributions.  If you earn more than £139 a week and up to £817 a week, you pay 12 per cent of the amount you earn between £139 and £817.  If you earn more than £817 a week, you also pay 2 per cent of all your earnings over £817.

Self-employed

If you’re self-employed you pay Class 2 and Class 4 National Insurance contributions.

You pay class 2 National Insurance contributions at a flat rate of £2.50 a week (unless your profits are expected to be under £5,315 when you may not have to pay any contributions).

Class 4 National Insurance contributions are 9 per cent on profits between £7,225 and £42,475, and a further 2 per cent on profits over that amount.

Value Added Tax (VAT)

VAT (Value Added Tax) is a tax that you pay when you buy goods and services in the European Union, including the UK.

There are three main rates of VAT in the UK: 0%, 5% and 20%.

There are some items on which you pay 0% VAT, such as most food items, children’s clothes and books, magazines and newspapers.

A VAT rate of 5% is charged on some items such as home gas and electricity and car seats.

Most items that you buy will have VAT at 20%.

2 comments

  1. Tax Fix says:

    Thanks for your question, Mike.

    The answer is no. You only pay National Insurance contributions for the weeks that you earn over £139. The weeks you earn less than £139 you will pay no National Insurance contributions.

  2. Mike says:

    If I earn under £139 some weeks and over £139 other weeks (and average over £139) do I pay National Insurance every week?

Leave a Reply