Income Tax and National Insurance Contributions
Nearly all workers in the UK have to pay tax and national insurance contributions. The Government uses the money raised through taxes to run the country. National insurance pays for benefits when people retire or are sick or unemployed. Tax and national insurance are deducted from your wages by your employer and sent to HM Revenue and Customs (HMRC), the government tax department.
The amount of tax and national insurance you pay depends on how much you earn.
Your employer has to give you a pay slip which should show you what money is being taken from your wages and what this money is for. You will see how much tax and national insurance has been deducted on your pay slip. At the end of the tax year, you should get a form called a P60. This will have details of what tax and national insurance you have paid over the year. These documents are very important as you may need them to prove that you have paid your tax and national insurance.
A tax year officially starts on April 6th and runs until April 5th of the following year.
Everyone has the right to receive some of their income tax-free every year. This is called a ‘Personal Allowance’. HMRC will send you a statement of how your tax is worked out. This is called a ‘Notice of Coding’.
If you are starting your first job in the UK, you will probably start to pay emergency tax until you have been given a proper tax code. This means you may pay more tax to start off with. You may also be given a temporary national insurance number if you don’t already have one.
What if you don’t pay tax and national insurance?
Some employers may offer you a job without paying tax or national insurance. This is known as cash in hand and it’s against the law. If your employers are breaking this law, it is very likely they will break other employment laws as well, especially those which protect workers. It will be very hard for you to take action to get your legal rights if you aren’t working legally. You should avoid this type of job.
What if your employer doesn’t pass on your tax and National Insurance?
Some employers deduct money from you. They say it is for tax and national insurance but don’t pass it on to HMRC. You should make sure that you’re getting pay slips and a P60 at the end of the tax year. These documents prove that you have paid tax and national insurance. If your employer has kept the money, HMRC will investigate them. However, if you don’t have your payslips and your P60, it will be hard for you to prove you have paid tax and national insurance. This may affect what benefits you can get and HMRC could chase you for unpaid tax which they say you owe.
You can also come and talk to the Advice Service in confidence. We are impartial and here to advise in your best interests. We have a drop in service between 12pm and 2pm, Monday to Friday in the Student Support Centre. Alternatively you can email us on: email@example.com.