What is the current rate of income tax? Also...?

Question

What percentage of our earnings do we get taxed? I know different salaries fall into different bands, so what is it for under £14,000? Also, if you were to take on a second job on top of what you're doing, what is the percentage rate for that one? The second one would be part time (12 hours or something like that) and minimum wage.

Thank you in advance.

Answer 1

Steve has explained it admirably.

Just to comment that for 2008/09 the personal allowance is £5,435 and the higher rate kicks in at £36,000 of taxable income (after deducting the personal allowance).

Answer 2

In UK you get charged INCOME TAX .. it does not matter how many jobs you have (or, at least to some extent, where the money is coming from) you get charged on your TOTAL income.

Employers deduct Tax from your wages using system known as PAYE .. this means you pay your Tax gradually during the year (and not in one massive lump at the end).

Everyone is allowed to receive some income without Tax. This is called the 'Personal Allowance' .. it's £5225 this year (but you are only allowed to use 1/12th of your Personal Allowance per month)...

After that, you pay at 20% on the rest of your income (if your income exceeds  Ã‚£34,600 in a year, you pay 40% tax on the excess, but I'm going to guess you won't be in that bracket yet)

To work out how much to deduct, Employers use your 'Tax Code' ... you tell the Tax man you have 2 jobs, and he will issue 2 codes .. one will be something like 522L the other 0L

The 522L code is the one that includes the Personal Allowance .. typically you will choose to use this with your higher paying job (say 'Job 1')...

SO - for Job 1, first you get your Personal Allowance (1/12th) 'Tax free' and then you get Taxed at 20% on everything else.

For Job 2 etc. you get Taxed at 20% on everything ..

You also have to pay 'National Insurance' contributions (actually, this is just another Tax), which will be about another 7 or 8% ...