Home » Emigration Guides » UK » Money And Costs » Tax And Social Security Payments In The UK

Every person working full time, part time or temporarily in the UK is liable for the deduction at source of income tax and social security contributions from their monthly wage, with benefits and perks received as part of the employment package taxable as well. The amount of tax due is calculated against your personal allowances at a varying rate according to your gross salary.

The basic 2012—2013 personal allowance for workers under the age of 65 is ?8,105, with no tax payable if your total earnings are below that level. The balance of your full wage with the personal allowance deducted has Income Tax levied at 20 per cent if your wage is less than ?34,370 per annum.

The tax rate increases to 40 per cent if your annual wage is between ?34,371 and ?150,000 and tops out at 50 per cent over ?150,000. Social security in the UK is known as National Insurance, and is deducted from wages in the same manner as Income Tax, with employers making a contribution as well as employees.

National Insurance rates 1, 2, 3 and 4 vary considerably across the UK’s employment pool, with special rates for designated trades as well as reduced rates, for example, for married women earning between the primary and upper earnings thresholds. For those employed, your company’s accounts department will have software solutions making sure the correct amount is deducted.

For the self-employed and smaller business owners without in-house accounts staff, it’s best to hire an accountancy firm specialising in Income Tax and National Insurance. Rates, rules, allowances and exceptions change annually with the national Budget Statement, and fines for non-compliance by mistake can cripple the self-employed or small business owner.