5.8.1 Income tax
People in the UK have to pay tax on their income, which includes:
- wages from paid employment
- profits from self-employment
- taxable benefits
- income from property, savings and dividends.
Money raised from income tax pays for government services such as roads, education, police and the armed forces.
For most people, the right amount of income tax is automatically taken from their income from employment by their employer and paid directly to HM Revenue & Customs (HMRC), the government department that collects taxes. This system is called ‘Pay As You Earn’ (PAYE). If you are self-employed, you need to pay your own tax through a system called ‘self-assessment’, which includes completing a tax return. Other people may also need to complete a tax return. If HMRC sends you a tax return, it is important to complete and return the form as soon as you have all the necessary information.
You can find out more about income tax at www.hmrc.gov.uk/incometax. You can get help and advice about taxes and completing tax forms from the HMRC self-assessment helpline, on 0845 300 0627, and the HMRC website at www.hmrc.gov.uk.
5.8.2 National Insurance
Almost everybody in the UK who is in paid work, including self-employed people, must pay National Insurance Contributions. The money raised from National Insurance Contributions is used to pay for state benefits and services such as the state retirement pension and the National Health Service (NHS).
Employees have their National Insurance Contributions deducted from their pay by their employer. People who are self-employed need to pay National Insurance Contributions themselves. Anyone who does not pay enough National Insurance Contributions will not be able to receive certain contributory benefits such as Jobseeker’s Allowance or a full state retirement pension. Some workers, such as part-time workers, may not qualify for statutory payments such as maternity pay if they do not earn enough.
Further guidance about National Insurance Contributions is available on HMRC’s website at www.hmrc.gov.uk/ni.
18.104.22.168 Getting a National Insurance number
A National Insurance number is a unique personal account number. It makes sure that the National Insurance Contributions and tax you pay are properly recorded against your name. All young people in the UK are sent a National Insurance number just before their 16th birthday.
A non-UK national living in the UK and looking for work, starting work or setting up as self-employed will need a National Insurance number. However, you can start work without one. If you have permission to work in the UK, you will need to telephone the Department for Work and Pensions (DWP) to arrange to get a National Insurance number. You may be required to attend an interview. The DWP will advise you of the appropriate application process and tell you which documents you will need to bring to an interview if one is necessary. You will usually need documents that prove your identity and that you have permission to work in the UK. A National Insurance number does not on its own prove to an employer that you have the right to work in the UK.
You can find out more information about how to apply for a National Insurance number at www.gov.uk.