Freedom at last. You have left university
and have got your first full time job. You finally have
some money in your pocket. Unfortunately, becoming a
fully fledged member of the 'real' world isn't without
its problems. With your new job comes extra responsibilities
and commitments. Such as having to pay tax and National
Insurance. This page is intended to help you with some
of the problematic situations that you may encounter
and tell you of what benefits your new job may entitle
Tax is the government's way of raising
money to spend on the common good. It is spent on services
such as education, health and social security. The money
comes from various sources, including Value Added Tax
(VAT), company profits and people's salaries. It is
the last of these that you will be affected by with
your new job.
Income Tax You will probably have
to pay income tax when you start your first job. A certain
amount will be taken from your wage by the government.
Only those people who earn less than £4195 a year
will be exempt from paying it.
Tax Bands Those of you who earn up
to £27,100 a year, will be taxed the basic rate
of 23 per cent. Any earnings over this amount will be
taxed at the higher rate of 40 per cent.
Pay As You Earn (PAYE) The idea behind
PAYE is that you are able to spread your income tax
payments throughout the year. As the name suggests you
pay tax as you earn it, as opposed to having to pay
one large sum.
When you start the job, your employer
will give you a P46 form to fill in. You should sign
and complete this to confirm that this is your first
job since you left full-time education. After filling
in the form you will then be given your PAYE tax code.
The code is normally a number followed by a letter,
although it can be the other way around. It is more
than likely that your code will be L419. The 'L' indicates
that you are entitled to the basic personal allowance
for a person under 65. This allowance is £4,195.
Anything you earn over this amount will be taxed. The
'419' just indicates that your allowance is £4,195.
It is then your employer's responsibility to return
the form to your local Tax Office.
If you claimed Job Seekers Allowance
(JSA), or income support before you started this job
then you must fill in a P45 form. These can be obtained
from your local benefit office. It will ask you about
which benefits you had been claiming, and for how long.
You should then pass the completed form onto your employer.
Those of you starting work after Employment
Training (E.T), or Youth Training (Y.T) will not have
to complete a P45. Your employer will ask you to complete
a P46. If you were given a P45 after finishing E.T or
Y.T then you must give this to your new employer.
You must notify the branch where your
account is kept that you have started work. The interest
that you get on the money in your account will now be
HOW TO FIND OUT IF YOU HAVE BEEN
TAXED TOO MUCH OR TOO LITTLE Back to
At the end of each tax year, which
is the end of March, your employer will give you a P60.
This will tell you how much tax you have paid. The Tax
Office will also check a copy of the P60, which your
employer will give them. If the amount of tax you have
paid is too much, or too little, the Tax Office will
You must keep records regarding the
tax you pay. This is because every few years your Tax
Office will send you a tax return form. This is just
to check that the personal details they hold on you
are still correct. The information that you should be
able to give is:
- Tax code
- P60 forms
- P45 (part 1A)
- Details of expenses and benefits
(These will be discussed later in this article)
You must also notify your employer
if you change your name or address. They will then amend
your personal details and inform the Tax Office of the
As well as paying income tax from
your wages, you must also pay N.I. These contributions
go towards the benefits which you may well receive in
later life, such as income support and a state pension.
Your N.I. Card and Number Just before
your 16th birthday you should have received an N.I.
card in the post. This will provide you with your N.I.
number, which will actually be a combination of numbers
and letters. This number will be unique to you. You
must quote it when dealing with the Tax Office. As the
number helps to track down your individual details.
If you have not yet received a card, yet are over 16,
then you must contact your local Tax Office, or the
Inland Revenue directly.
How Much N.I. Do You Have to Pay ?
If you earn under £64 a week
then you do not have to pay any N.I. However, if you
earn over £64 a week then you must pay 2 per cent
of the £64 in N.I., and 10 per cent on any amount
over £.64. Any earnings over the amount of £485
a week are not subject to N.I. reductions.
Here are some examples of how much
N.I. you might be paying :
If you earn £8,000 a year and
are paid weekly, you will pay £10.63 a week in
If you earn £12,000 a year and
are paid monthly, you will pay £77.76 a month in
If you earn £20,000 a year and
are paid monthly, you will pay £144.56 a month
If you have a query regarding the
income tax that you pay then the address and phone number
of your local Tax Office will be in the phone book.
It will be listed under Inland Revenue. It is best to
deal with this office as it will be the office that
has all the information regarding the tax which you
Inland Revenue Helpline 0645 000444
Alternatively, you can write with
your queries to :
Inland Revenue P.O Box 37 St. Austell
Cornwall PL25 5YN
However, always contact your local
Tax Office and see if they can answer your question
before you contact the above address.
Inland Revenue Order Line 0645 000404
(For ordering leaflets which will help explain about
tax and tax related problems. All leaflets are free)
Useful forms include :
IR34 - Pay As You Earn
IR37 - Income Tax and Capital Gains Tax : Appeals
IR57 - Thinking of Working For Yourself ?
IR60 - Income Tax and Students
IR90 - A Guide to Tax Allowances and Reliefs
IR119 - Tax Relief for Vocational Training
If you have a complaint against the
way in which your Tax Office has treated you then contact:
The Adjudicators Office Haymarket
House 28 Haymarket London SW1Y 45P
Telephone: 0171 930 2292 or 0171 930
If you are still not satisfied then
you can get your local M.P to refer the issue to Parliament.
They will contact the Parliamentary Commissioner for
Administration, or Ombudsman as they are more commonly
known. The Ombudsman will investigate your case and
decide whether there is a case to answer.
The Parliamentary Commissioner for
Administration Millbank Tower Millbank London SW1P 4QP
You may be lucky enough to work for
a company which offers you one or more benefits. Here
are some of the more common schemes which you may well
be able to take advantage of:
Pension - Your state pension is unlikely
to provide an adequate income when you retire. Therefore,
it is a good idea to invest in a company pension. These
schemes vary greatly from company to company, but there
are two main types.
Final Salary Scheme - The amount you
receive is linked to how long you have been at the company
and your rate of pay when you leave, or retire.
Money Purchase Scheme - The amount
you receive depends on how the contributions which you
have made to the scheme grow. And the rate at which
your fund can be swapped for a pension at retirement.
Most company pensions are contributory,
whereby you are asked to pay money into the scheme.
The usual amount that you will put into these schemes
will be between 2 and 5 per cent. But you can put as
much as 15 per cent into the pension, if you so wish.
If you are lucky, you will be part of a non-contributory
scheme, in which you are not obliged to pay anything
into the fund.
Company Shares - When starting a new
job you may well be given some free shares in your new
company. The amount of shares you get will vary, depending
on who you work for. You may sell your shares straight
away, or keep hold of them for as long as you wish.
Some schemes may not allow you to sell your shares in
your first year or two.
Company Car - Your company may give
you a car to help you in your work. They will also pay
for the car insurance and all costs attributed to the
vehicle, such as petrol, tax discs and repair work.
You will, however, have to pay for your own personal
use of the car. The company will probably charge you
between 3p and 13p a mile for private use.
Paid Holidays - Employees are entitled
to 3 weeks paid holiday a year. This figure will rise
to 4 weeks in November 1999. Some companies may offer
you more than four weeks holiday a year. A week is deemed
to be 5 days.
Life and Health Insurance - Your company
may insure you so that if you suffer illness or an accident
you will be covered and entitled to financial assistance.
For example, the cover may pay you two-thirds of your
wages for days missed to prolonged illness. If you should
die, your family will receive a cash sum, if you are
covered by the companies life insurance policy.
Private Health Care - Some companies
will pay part, or all of the costs for you to join a
private health care scheme, such as BUPA. Comprehensive
schemes may also cover your partner and children.
Loans - You may be entitled to a loan
at a reduced interest rate from your company. Loans are
available for things such as buying a car or a house.