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How Much Tax Do I Pay?

As Benjamin Franklin once famously remarked: “In this world nothing can be said to be certain, except death and taxes.”  We pay tax on everything from our income to our home and our groceries and so our guide looks at how much tax you can expect to pay.

Income Tax

There are several different tax bands and rates depending on your income.  The question “How much tax do I pay?” will therefore depend very much on your specific personal circumstances such as the tax allowances that you are eligible for and where your income comes from.

Typically, you’ll pay the following tax in the 2011/12 tax year:

  • 0% on the first £7,475 that you earn (this is your Personal Allowance)
  • 20% on the next £37,400 that you earn
  • 40% on the next £112,600 that you earn
  • 50% on anything over this

National Insurance Contributions

The amount of National Insurance contributions that you pay will depend on whether you are employed or self employed.

If you’re employed you pay Class 1 National Insurance contributions at the following rates:

  • 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

If you’re self-employed you pay Class 2 and Class 4 National Insurance contributions at the following rates:

  • Class 2 National Insurance contributions are paid at a flat rate of £2.50 a week
  • Class 4 National Insurance contributions – you pay 9 per cent on any profits between £7,225 and £42,475, and a further 2 per cent on profits over that amount

VAT

Value Added Tax (VAT) is a tax that you pay when you buy certain goods or services.  Most goods and services in the UK are subject to VAT and the tax is payable at one of three rates:

  • Standard rate (20%) – Most goods and services attract VAT at this rate
  • Reduced rate (5%) – On certain goods such as children’s car seats and gas and electricity for your home
  • Zero rate (0%) – There are some goods on which you don’t pay any VAT such as most foodstuffs, books, children’s clothes, magazines and newspapers

Other Taxes

As well as these three main taxes there are other taxes that you may pay.  Again, the rates vary depending on your specific circumstances.

The main other taxes are:

  • Inheritance Tax (IHT) – Payable if your estate (including any assets held in trust and gifts made within seven years of death) is valued over the current Inheritance Tax threshold (£325,000 in 2011-12).  The tax is payable at 40%
  • Capital Gains Tax (CGT) – Payable on capital gains’ (any profit that you make when you sell or give away an asset if it has increased in value.  The tax is payable at 10%,18% or 28% depending on your circumstances
  • Road Tax – Payable if you want to take a vehicle on a public road.  The rate varies from £0 to over £1,000
  • Council Tax – Payable based on the value of your home.  The rate payable is determined by your local authority

Laura  - Wednesday, August 31st, 2011

If I earn £165 per week, should I be paying National Insurance?

Tax Fix - Wednesday, August 31st, 2011

Laura

Yes. You should be paying 12% of your earnings over £139 per week.

So, you should be paying £3.12 a week (£165-£139 x 20%).

tracy wakefield - Friday, September 30th, 2011

i work full time but my husband is on disability benefit. can i claim his tax as im the only earner

shigeto - Wednesday, November 2nd, 2011

Hi, Taxfix
I earned £595.14 last October then the RAYE tax was 118.60, NI employee contribution was £4.68 and total £123.28 was taken away from my earning. Is it right tax? Because when I worked for last employer on April 2011, I earned 649.34, RAYE tax was 5.20 and NIC was 5.68. I changed my job and started since last September. Is there any way to get back my tax?

Mike Skene - Wednesday, January 11th, 2012

What value of shares can i sell before i have to pay tax on any profit that may be gained.

Is there a yearly allowance for the value that can be sold tax free ???

lr dobbs - Saturday, March 31st, 2012

how much tax will i pay on my reduncy above 30000

kathleen barlow - Monday, April 9th, 2012

i expect to have 47000 pounds in defered state pension how much tax will I have to pay

Nick johnson - Monday, May 28th, 2012

I have no tax code yet as I have not started job.how much tax do I pay on earning 200 a week

john - Tuesday, June 26th, 2012

lm self-employed how much tax do i pay on £9457.00

Mary  - Tuesday, August 28th, 2012

Will a 61 year old retired female pay tax on savings.

Blu - Wednesday, September 5th, 2012

what do i do if i have not be paying my national insurance and tax for a year, i get £200 a week