How Much Tax Should I Pay?

As Benjamin Franklin once famously remarked, “in this world nothing can be said to be certain, except death and taxes.”

All of us pay some sort of taxes whether it is on our income, our home or the goods and services that we buy.  Our guide looks at the main income taxes in the UK and how much tax you should pay.

Income Tax

The amount of income tax that you pay depends on two factors: the amount that you earn and the amount of ‘tax allowances’ that you are entitled to claim.  Everyone in the UK is entitled to claim their personal allowance – the amount you can earn before you start paying tax – and there are also other allowances for married couples and people who are registered blind.

In simple terms, in the tax year 2011/12 you should pay no income tax if you earn less than £7,475 (the amount of the personal allowance).

You will then pay 20 per cent tax on the next £35,000 that you earn, 40 per cent tax on the next £115,000 after that and 50 per cent on any further earnings.

For example, if you earned £15,000 in the tax year 2011/12 and you had the basic personal allowance, you would pay tax as follows:

  • £0 – £7,475 – No tax (this is your personal allowance)
  • £7,475 – £15,000 (equivalent to taxable income of £7,525) taxed at 20 per cent = £1,505 tax

If you earned £60,000 a year and had the basic personal allowance, you would pay tax as follows:

  • £0 – £7,475 – No tax (this is your personal allowance)
  • £7,475 – £42,475 (equivalent to taxable income of £35,000) – 20 per cent – £7,000
  • £42,476 – £60,000 (equivalent to taxable income of £17,524) – 40 per cent – £7,010

Here, your total tax bill would be £14,010.

National Insurance Contributions

As well as paying income tax on your earnings you will also pay National Insurance Contributions (NICs).  The amount of NICs that you pay depends on whether you are employed or self employed.

If you’re employed, you’ll pay the following NICs in the tax year 2011/12:

  • Earnings of £0 – £139 per week – Nil
  • Earnings of £139 to £817 per week – 12 per cent
  • Earnings above £817 per week – 2 per cent

If you’re self employed, you’ll pay the following Class 4 NICs in the tax year 2011/12:

  • Annual profits under £7,225 – Nil
  • Annual profits of £7,225 to £42,475 – 9 per cent
  • Annual profits above £42,475 – 2 per cent

In addition, if your profits are over £5,315 you will pay Class 2 National Insurance contributions of £2.50 per week.

11 comments

  1. katherine says:

    i need to know how much tax and insurance i would pay on a basic wage of £138 per week

  2. Eric says:

    How much tax do I pay if I only earn 9000 thousand pounds in 2014

    • TaxFix says:

      Eric: You shouldn’t pay any tax as you are earning below the tax free allowance. If you do pay any tax, you can claim it all back.

  3. greg says:

    i earned around £28500 last year self employed and paid 20% on every thing i made about £5500, but i spent around 3or£4000 on fuel travel and tools. do i still owe more tax or will i be due a refund.

  4. Nick says:

    I am a self employed architect my houlry rate is £95 and when jobs come in I charge a lump sum as a percentage of the build cost, my day rate is £760. However due to the recession I am looking for full time work and have been offered a job at £60k but it works out after 40% tax, etc of only £172 per day less than a general building worker.
    What should I do?

  5. george says:

    I earn 700pw. And self employed. Hw much tax I pay ?

  6. karen says:

    do i have to pay tax & ni when im receiving statutory sick pay

  7. RYAN says:

    Am I required to pay tax if I have 2 jobs but still earn under £7,000?

  8. jane says:

    do i need a p60 if work less than 15rs a week

  9. TaxFix says:

    sameer: If you have left the UK you can make a claim for a tax refund. You can apply here.

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