UK Tax Guide & Glossary

The Basics: This is a tax on your earnings. Not all your income is taxed; most people get a Personal Allowance (currently £12,570) which is tax-free. You can check current Income Tax rates on the government website.

• Basic Rate (20%): You pay this on earnings between £12,571 and £50,270.
• Higher Rate (40%): You pay this on earnings between £50,271 and £125,140.
• Additional Rate (45%): You pay this on earnings over £125,140.

The Basics: Unlike Income Tax, which funds general spending, National Insurance (NI) builds your entitlement to certain state benefits, like the State Pension.

You usually pay NI if you're an employee earning more than £242 a week. It is calculated per pay period (weekly or monthly), not annually like Income Tax.

• Main Rate (8%): Paid on earnings between £12,570 and £50,270.
• Upper Rate (2%): Paid on earnings above £50,270.

The Basics: Money put aside for your retirement. By law, employers must enroll eligible staff into a workplace pension scheme.

Why it's good: Pension contributions often come with Tax Relief. This means the money goes into your pension pot before tax is paid (Salary Sacrifice) or the government adds the tax back in (Relief at Source). Effectively, it costs you less to save more.

The Basics: If you went to university in the UK, you likely have a student loan. Repayments are taken automatically from your salary, but only if you earn above a certain threshold. You can find more details on repaying your student loan on GOV.UK.

• Plan 1: 9% of earnings over £24,990.
• Plan 2: 9% of earnings over £27,295.
• Plan 4 (Scotland): 9% of earnings over £31,395.
• Postgraduate: 6% of earnings over £21,000.

If you earn below the threshold, you pay nothing back that month.