Income Tax & National Insurance

Tax and National Insurance through the PAYE (Pay As You Earn) system.

All employees pay Tax and National Insurance through the PAYE (Pay As You Earn) system. This is worked out automatically through whichever payroll program your employer uses.

Income Tax

Being taxed on your wages can be very complicated and the amount you are taxed each week/month depends on what your Personal Allowance is set at for that tax year. The Personal Allowance is how much (annually) you are allowed to earn before you are taxed and this is spread out across the tax year. Each year you will be issued with a tax code from HMRC, this is entered into the payroll program and then calculates how much tax is due each time you are paid. All income is taxable, this includes Pool Money.

National Insurance Contributions

You need a National Insurance number to make contributions. This is given to UK residents when they turn 16. For anyone outside of the UK you can apply for a number by calling 0345 600 0643. National Insurance contributions are, like tax, deducted from your wages but only if you earn more than £155 per week. These contributions are made if you are employed, are over 16 and are paid until you reach state pension age.

You pay National Insurance contributions to qualify you for certain benefits including state pension. Although you don’t pay National Insurance on Pool Money, you do pay Income Tax on this. If you are self-employed and making a profit over a certain amount every year (currently £5965), then you still have to make contributions.

There are a number of classes for National Insurance contributions depending on your employment status:

Class 1. This is for people employees earning more than £155 per week, over 16 and under state pension age. These are deducted directly by your employer.

Class 2. This is for self-employed workers if your profit annually is over £5965. You pay these yourself, usually through self-assessment.

Class 3. This is for voluntary contributions, to avoid having gaps in your contributions. More information on tax and national insurance can be found at: Gov.uk – Income Tax  Gov.uk – National Insurance

Get Support

If you need support or income advice do not hesitate to contact us on:

0800 6300 443