Wage Taxes

Wage taxes are taxes that we pay from our income, although it’s not a formal term in the accounting world, more of a colloquial phrase. In the UK, the wage taxes that we pay are Income Tax and National Insurance.

Income Tax is based on what we earn yearly and different incomes will require different rates of tax to be paid on a marginal basis. You have to pay it whether you’re employed or self-employed. The rate that you pay is based on the below table:

Income Tax rate  
Up to £12,570 0% Personal allowance
£12,571 to £50,270 20% Basic rate
£50,271 to £125,140 40% Higher rate
over £125,141 45% Additional rate

What kind of wage taxes are National Insurance payments?

There are five types of National Insurance payment:

Classes 1, 1A, 1B, 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 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 class Who pays? How? How much is it?
Class 1 Employees earning more than £242 per week who are under State Pension age a year Your employer deducts it through PAYE 10% (or 2% if you earn over £262 a week)
Class 1A or 1B Employers Your employer pays it on top of your Class 1 14.53%
Class 2 Self-employed people earning over £6,725 a year Through a Self Assessment tax return Flat £3.45 per week (scrapped from 6 April 2024)
Class 3 Voluntary contributions – you can pay them to fill gaps in your NI record Through a Direct Debit £17.45 per week
Class 4 Self-employed people earning over £12,570 a year Through a Self Assessment tax return 9% (or 2% if you earn over £50,270) – this goes down to 8% from 6 April 2024

To learn more about National Insurance, visit our dedicated glossary page. If you know which class of National Insurance you should be paying, we have separate pages outlining the details of each.

Frequently Asked Questions

  • Is National Insurance mandatory?

    National Insurance is mandatory. If you are employed and pay your tax via PAYE, your National Insurance contributions will also be deducted automatically from your wages. If you are self-employed, it’s important to make sure you have the right tax code to ensure that you are paying the correct National Insurance via your Self Assessment tax return.

  • I already pay PAYE, do I need to do anything else about my Income Tax?

    Nope! If you earn less than £100,000 per annum and pay tax via PAYE, you are already sorted and your income tax is being taken automatically from your wages before they even reach you.

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