Topic Summary
For people in employment, certain deductions are taken from your gross pay. The main ones are:
- National Insurance: Paid to the government to cover illness or absence from work.
- Income Tax: A tax collected monthly from your gross pay.
- Pensions: Contributions that may be deducted to help build a retirement fund.
- Student Loans: Deductions for repayment if you continue into higher education.
National Insurance (NI):
- Your NI number is a unique personal account number with the government that never changes.
- It is needed for various applications (starting a job, claiming benefits, taking out a mortgage). Everyone over 16 who earns or has self-employed profits above a certain threshold pays NI.
- You pay National Insurance contributions to qualify for certain benefits and the State Pension.
Income Tax:
Income Tax is progressive, meaning that as you earn more, you enter higher tax bands and pay a higher rate on the income within those bands.
Student Loans:
- Money borrowed to pay for university education.
- Repaid through salary deductions based on how much you earn, not on how much you borrowed.
After deductions, you are let with: Net Pay
- This is the amount left after all deductions have been made from your gross pay.
Question
In the UK income tax rates are progressive, meaning:
Discussion
Is progressive taxation fair?
How it works in real life
Research the average salary for a job you would like to do in the future. Can you calculate what your likely take home pay would be each month?