Taxes in the UK are: PAYE, NI and Council Tax; Is the retirement pension included in the NI?
2 - Other thing I don't know what means is the allowance that isn't taxed, what does this mean? And is this applied to my first salary only?
3 - I'm single, so I suppose my tax code number is going to be 503L or 522L but I'm not sure... how may I know this?
Sorry if my questions are a bit confusing...
Answers:
You are trying to over simplify things.
As you know the way the Government earns money to provide a multitude of services such as hospitals, roads, defence, etc is through everbody paying taxes.
There are basically two forms of taxation, direct taxes e.g taxes paid on your earnings, etc, and indirect taxes such as VAT.
Everybody who earns has to pay taxes, there are various ways that the taxes are collected.
One way is PAYE (Pay as you Earn) which is where your employer deducts taxes and Natinal Insurance Contributions from your salary and then pays the amounts over to HMRC, another way is through self-assessment, that way is usually for the self-employed, or anybody where the Revenue need to examine your financial affairs more closely.
National Insurance is another tax that we pay, here you pay into your scheme to build up credits towards any benefits you may claim, and your state-pension. If your NI scheme isn't kept up to date your entitlement to benefits and your state-pension can be seriously affected.
You can of cousre in addition to NI set up a private pension scheme, or join the company you work for pension scheme. Some companies make this compulsory some don't and you will have to pay that extra, its like an insurance policy you pay in for ages, it matures and you then start getting money back.
Now to explain the tax code..
Unless you have unusual circumstances your tax code will be for 2007 -2008 522L. That means the first £5225.00 that you earn in a year is not taxed.
How does it work. well it depends on how often you get paid if you get paid monthly your tax free allowance would be £5225.00 / 12 = £435.42, if you earn more than that amonth then you will pay tax.
If you get paid weekly then its £5225.00 / 52 = £100.48 so if you earn more than this a week you will get taxed.
When you start work for an employer by law that employer must issue you with a payslip/ wage slip and on that wage slip will be the tax code they have used.
Its a long answer but you had many questions.
I'm not sure about a lot of that sorry, but I just wanted to say that if this is ur first job, I assume u r in ur 20's( as am I) anyhows, by the time we get to retire we won't recieve a government pension as there will be more old folk than young 'uns paying into the pot!!So I'd start a private pension if I were u!
I'lll try and answer the National Insurance bit. N.I.contribtuions give you an entitlement to a State Pension. Currently a man has to pay 44 years (women 39) to get the full pension of about £88. BUT, the Government has said it will soon reduce this to 30 yrs (men and women). So each year of contributions will give you about 3% of your pension.
But, does this matter ? No not really, if you never made any contirbutions and had no other income or savings, you will get the Pension Credit of about £120. Whether any of this will still apply when you are 68 and qualify for a pension is anyone's guess.
You pay tax based on the amount you earn but some small part of your earnings are not taxed. So for example you earn 20K then the first say 4k (not actual figures) is free of tax but you pay tax on the rest ie 16k. NI is a separate payment and is a percentage of your earnings. This qualifies you after paying it for about 40 years to a full pension.Council tax you pay from your net earnings after you have already paid your personal tax on your earnings. Also from your net earnings you pay road tax and all the other additional charges. Going back to your PAYE and NI these will take care of anything up to 27% of your earnings.
Good luck with your your new job and enjoy the income and the friendship of your colleagues.
pa ye mean pay income tax as you earn, this is paid to dept of Inland revenue and deducted from your pay each week or month. council tax is charged on your house and collocated by your local council, it is nothing to do with your employment status, however you can claim rebate if you are unemployed, or on a low income, NI is national Insurance also collected by central government and deducted from your pay, it is used toward your pension, or unemployment benefit if you have paid enough and then lost your job. you do not pay any income tax on part of your income, you can talk to some one in citizen advice centre, or department of Inland revenue, or at a job centre. Good Luck with your job.
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