Wage taxes are taxes that we pay from our income, although it’s not a formal term in the accounting world.
In the UK, the wage taxes that we pay are Income Tax and National Insurance.
Income Tax is based on what we earn yearly. You have to pay it whether you’re employed or self-employed. The rate that you pay is based on the below table:
Take a look at the HMRC website if you want to keep up to date with Income Tax rates.
IncomeTax rateUp to £12,5700%Personal allowance£12,571 to £50,27020%Basic rate£50,271 to £125,14040%Higher rateover £125,14145%Additional rate
There are six types of National Insurance payment:
Classes 1, 1A, 1B, 2,3 and 4 National Insurance. By paying them, we get access to state-provided benefits like the Job Seeker’s Allowance, the Marriage Allowance, the state pension and more.
If you’re self-employed, you have to pay Class 2 and Class 4 National Insurance. For those who are employed, you pay Class 1 National Insurance through PAYE (i.e. if you are salaried).
Take a look at the table below to see the different classes of National Insurance and how much you owe for each in the 2023/24 tax year:
NI classWho paysHow is it paidHow much is itClass 1Employees earning more than £12,570 a yearYour employer deducts it through PAYE12% (or 2% if you earn over £50,270 a year)Class 1A or 1BEmployers for employees earning over £9,100 a yearYour employer pays it on top of your Class 114.53%Class 2Self-employed people earning over £6,725 a yearThrough a Self Assessment tax returnFlat £3.25 per weekClass 3Voluntary contributions – you can pay them to fill gaps in your NI recordThrough a Direct Debit£17.45 per weekClass 4Self-employed people earning over £12,570 a yearThrough a Self Assessment tax return9% (or 2% if you earn over £50,270)
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