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Finances / Finanzen » uk.finance » QUERY: beginner to PAYE tax & NI
| QUERY: beginner to PAYE tax & NI [message #383245] |
Di, 25 April 2006 11:53 |
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This is regarding UK England. I don't know much about taxes and wanting
some more help and advice.
I understand that the PAYE tax rate is 22%?
Is it true that one can reclaim his tax payments back for a tax year if
he earned less than 10,000 during that tax year. Is it correct that
it's to do with how much one earned during that tax year, and not how
much you would've earned if you worked for a whole tax year?
Why is my National Insurance contributions different each month? I
understand that NI is for NHS and entitles one to NHS hospital
treatment. However, is the amount each month related to how much that
person used NHS services? So if you go to the doctors/hospital regulary
then you get higher NI contributions?
A friend told me he got tax discount (3 months of low tax pay) when he
first started his job. He was a student then got a job and stopped
studies. I never got this when I graduated and got a job immediately
afterwards. Is this right?
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| Re: QUERY: beginner to PAYE tax & NI [message #383262 ] |
Di, 25 April 2006 12:58 |
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dhruba.bandopadhyay [at] hotmail.com wrote:
> I understand that the PAYE tax rate is 22%?
That is indeed the marginal tax rate which most taxpayers pay.
But if your annual income is less than about £5000, your tax rate
is zero. If it's less than about £7000 it (i.e. the marginal rate)
is 10% (i.e. if you earn £7k, you pay 10% of £2k). Above £7k, it's
22% (so if you earn £10k you pay 10% of £2k plus 22% of £3k).
Above about £38k it's 40%.
> Is it true that one can reclaim his tax payments back for a tax year if
> he earned less than 10,000 during that tax year.
No. If you've paid too much tax, you can reclaim it no matter how much
or how little you've earned.
> Is it correct that
> it's to do with how much one earned during that tax year, and not how
> much you would've earned if you worked for a whole tax year?
Yes. But typically an employer will deduct tax at a rate which assumes
will earn the same for the rest of the tax year. So if you then stop
working and have no further income for the rest of the year, you will
have paid too much tax, which you will then be able to reclaim.
> Why is my National Insurance contributions different each month?
Is your pay different each month? Basically NI should be 11% of your
pay above £97 per week (£94 last year).
> I understand that NI is for NHS
No. NHS is funded from general taxation, but NI is just a general tax.
> and entitles one to NHS hospital treatment.
No. Entitlement is automatic even if you don't pay NI.
But paying NI creates an entitlement to the state pension.
> However, is the amount each month related to how much that
> person used NHS services? So if you go to the doctors/hospital regulary
> then you get higher NI contributions?
No.
> A friend told me he got tax discount (3 months of low tax pay) when he
> first started his job. He was a student then got a job and stopped
> studies. I never got this when I graduated and got a job immediately
> afterwards. Is this right?
Perhaps his three months were the last three months of a tax year.
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| Re: QUERY: beginner to PAYE tax & NI [message #383265 ] |
Di, 25 April 2006 13:00 |
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On 25 Apr 2006 02:53:47 -0700, "dhruba.bandopadhyay [at] hotmail.com"
<dhruba.bandopadhyay [at] hotmail.com> wrote:
>This is regarding UK England. I don't know much about taxes and wanting
>some more help and advice.
>
>I understand that the PAYE tax rate is 22%?
>
Basic rate is 22% but that's not the only rate and PAYE depends on
your tax code.
>Is it true that one can reclaim his tax payments back for a tax year if
>he earned less than 10,000 during that tax year.
No
> Is it correct that
>it's to do with how much one earned during that tax year, and not how
>much you would've earned if you worked for a whole tax year?
>
Yes
>Why is my National Insurance contributions different each month?
Your pay is different?
> I
>understand that NI is for NHS and entitles one to NHS hospital
>treatment.
Wrong
> However, is the amount each month related to how much that
>person used NHS services?
No
>So if you go to the doctors/hospital regulary
>then you get higher NI contributions?
>
No
>A friend told me he got tax discount (3 months of low tax pay) when he
>first started his job. He was a student then got a job and stopped
>studies. I never got this when I graduated and got a job immediately
>afterwards. Is this right?
No, not in the scenario you set out.
People say things all the time but it's best to ask for a reference or
look it up on web sites if you have know reason to think they know
what they're talking about.
Look here
http://www.hmrc.gov.uk/home.htm
--
Peter Saxton from London
peter [at] petersaxton.co.uk
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| Re: QUERY: beginner to PAYE tax & NI [message #383266 ] |
Di, 25 April 2006 13:14 |
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At 10:53:47 on 25/04/2006, dhruba.bandopadhyay [at] hotmail.com delighted uk.finance
by announcing:
> This is regarding UK England. I don't know much about taxes and wanting
> some more help and advice.
http://www.hmrc.gov.uk/leaflets/p3.htm
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| Re: QUERY: beginner to PAYE tax & NI [message #383267 ] |
Di, 25 April 2006 13:15 |
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"Ronald Raygun" <no.spam [at] localhost.localdomain> wrote in message
news:Chn3g.59165$wl.52056 [at] text.news.blueyonder.co.uk...
> Is your pay different each month? Basically NI should be 11% of your
> pay above £97 per week (£94 last year).
I've just checked http://www.hmrc.gov.uk/rates/nic.htm and it looks like the
NI rate plummets from 11% to just 1% for those earning over £645 per week!
I guess the government assume they can afford to go private rather than use
the NHS?
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| Re: QUERY: beginner to PAYE tax & NI [message #383268 ] |
Di, 25 April 2006 13:22 |
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"Peter Saxton" <peter [at] petersaxton.co.uk> wrote in message
news:qvvr429fl32f6se0p16fdadj70g0atgm29 [at] 4ax.com...
> >A friend told me he got tax discount (3 months of low tax pay) when he
> >first started his job. He was a student then got a job and stopped
> >studies. I never got this when I graduated and got a job immediately
> >afterwards. Is this right?
>
> No, not in the scenario you set out.
It might be he got a job 3 months before the end of the tax year - if he wasn't
earning prior to this and the employer got the relevant paperwork on time, then he
would have paid less tax in those 3 months than afterwards.
--
Andy
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| Re: QUERY: beginner to PAYE tax & NI [message #383269 ] |
Di, 25 April 2006 13:27 |
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"Adrian Boliston" wrote
> I've just checked http://www.hmrc.gov.uk/rates/nic.htm
> and it looks like the NI rate plummets from 11%
> to just 1% for those earning over £645 per week!
Yes, of course. It used to "plummet" to zero...
"Adrian Boliston" wrote
> I guess the government assume they can
> afford to go private rather than use the NHS?
Or they assume that, once they've paid
11% upto £645pw, they've already
paid enough for NHS service etc?
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| Re: QUERY: beginner to PAYE tax & NI [message #383270 ] |
Di, 25 April 2006 13:31 |
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"Adrian Boliston" <adrian [at] boliston.co.uk> wrote in message
news:4b6encFvup7jU1 [at] individual.net...
> "Ronald Raygun" <no.spam [at] localhost.localdomain> wrote in message
> news:Chn3g.59165$wl.52056 [at] text.news.blueyonder.co.uk...
>
> > Is your pay different each month? Basically NI should be 11% of your
> > pay above £97 per week (£94 last year).
>
> I've just checked http://www.hmrc.gov.uk/rates/nic.htm and it looks like the
> NI rate plummets from 11% to just 1% for those earning over £645 per week!
>
> I guess the government assume they can afford to go private rather than use
> the NHS?
NI has nothing to do with the NHS. It's supposed to be an insurance which entitles
you to claim benefits such as unemployment benefit (JSA), state pension, SERPS,
maternity/paternity pay etc.
But as most benefits are flat rate whereas most contributions are percentages of
salary, as you can claim for events which you caused deliberately (eg pregnancy), as
it is compulsory, and as there are means tested alternatives to most benefits which
you can get if you paid no premiums, it is clearly now a tax rather than an
insurance.
--
Andy
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| Re: QUERY: beginner to PAYE tax & NI [message #383274 ] |
Di, 25 April 2006 13:50 |
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"Andy Pandy" wrote
> NI has nothing to do with the NHS...
Not quite - when it was first introduced it was
considered to fund, among other things, the NHS.
Also, do I remember correctly that *all* of the
recent increase of 1% is supposed to be channelled
directly into extra funds for the NHS alone?
"Andy Pandy" wrote
> ... it is clearly now a tax rather than an insurance.
Agreed.
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| Re: QUERY: beginner to PAYE tax & NI [message #383275 ] |
Di, 25 April 2006 14:03 |
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"Tim" <me [at] home.uk> wrote in message
news:a7-dnZwU-IowmtPZnZ2dnUVZ8qGdnZ2d [at] bt.com...
> "Adrian Boliston" wrote
>> I've just checked http://www.hmrc.gov.uk/rates/nic.htm
>> and it looks like the NI rate plummets from 11%
>> to just 1% for those earning over £645 per week!
>
> Yes, of course. It used to "plummet" to zero...
>
> "Adrian Boliston" wrote
>> I guess the government assume they can
>> afford to go private rather than use the NHS?
>
> Or they assume that, once they've paid
> 11% upto £645pw, they've already
> paid enough for NHS service etc?
But then why does Income Tax work in the opposite way? It rockets from a
fairly reasonable 22% to a massive 40%, yet surely by the time they have
paid their tax on all their standard rated income then they have "paid
enough" to cover the costs of eductaion, defence, transport etc?
Looking at http://budget2006.treasury.gov.uk/page_09.html it looks like
expenditure in health & social security is about the same as the total
collected for all tax & Ni, so it shows that the notion of NI funding the
NHS & social security is a daft notion.
Why not simply combine Tax & NI into a single tax and have a 41% higher rate
and a 33% basic rate?
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| Re: QUERY: beginner to PAYE tax & NI [message #383279 ] |
Di, 25 April 2006 14:44 |
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"Why not simply combine Tax & NI into a single tax and have a 41%
higher rate
and a 33% basic rate?"
Lots of people think they should. There are a few practical obstacles
due to NI exemptions for people over a certain age etc., but these
could be dealt with by adjusting tax bands for different groups.
I suspect the main reason is that for at least the last 27 years
governments have been terrified of increasing the headline rate of
income tax. There's probably some justification in that - as voters
seem more sensitive to it than other taxes (e.g., Thatcher didn't lose
many votes by massively hiking the tax burden via VAT and Blair/Brown
haven't for their NI increases). However, the bottom line is that it is
a lcak of political courage.
Thom
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| Re: QUERY: beginner to PAYE tax & NI [message #383283 ] |
Di, 25 April 2006 14:54 |
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<dhruba.bandopadhyay [at] hotmail.com> wrote in message
news:1145958827.170645.54680 [at] e56g2000cwe.googlegroups.com...
> This is regarding UK England. I don't know much about taxes and wanting
> some more help and advice.
>
>
> Why is my National Insurance contributions different each month? I
> understand that NI is for NHS and entitles one to NHS hospital
> treatment.
As others have said, this is simply not true. NI is just another tax, pure
and simple. The only reason why it is separate from PAYE is so that the
government can claim that income tax is only 22%, rather than approximately
double that, as it is in practice (if you include employers' NI as well as
employees').
However, one important point to remember in answer to your original question
is that PAYE is calculated on an annual basis, but NI is calculated on a
monthly basis (or weekly if you are paid weekly). It is quite possible to
pay too much PAYE over the year if you changed jobs part way through and
your new employer didn't fill in the correct forms, so it's always worth
checking. You should be able to claim back any extra you have paid from the
Inland Revenue. Phone them up and ask them: they are mostly fairly helpful.
NI is much simpler to calculate, and it is less likely that there will be
anything to claim back.
HTH
Adam
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| Re: QUERY: beginner to PAYE tax & NI [message #383289 ] |
Di, 25 April 2006 14:05 |
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Bitstring <4b6fkvFvpt1lU1 [at] individual.net>, from the wonderful person
Andy Pandy <spam8times [at] wonderful.spam.invalid> said
<snip>
>NI has nothing to do with the NHS. It's supposed to be an insurance
>which entitles
=WAS= supposed to be, maybe. These days you are not allowed to starve
regardless of whether you have NI contributions or not. Actually you're
sometimes better off if you don't have, iirc.
>you to claim benefits such as unemployment benefit (JSA), state pension, SERPS,
>maternity/paternity pay etc.
>
>But as most benefits are flat rate whereas most contributions are
>percentages of
>salary, as you can claim for events which you caused deliberately (eg
>pregnancy), as
>it is compulsory, and as there are means tested alternatives to most
>benefits which
>you can get if you paid no premiums, it is clearly now a tax rather than an
>insurance.
Likewise SERPS, Graduated Pension, and various other things which have
gone down the government plughole over the years. The whole concept of
'you gets what you paid for' is completely foreign to governments which
believe 'you pays what (we think) you can afford, you gets what (we
think) you need'.
--
GSV Three Minds in a Can
Google may be your friend, but groups.google.com posters definitely aren't.
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| Re: QUERY: beginner to PAYE tax & NI [message #383346 ] |
Di, 25 April 2006 18:42 |
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"Adam" <nospam [at] nospam.com> wrote in message
> As others have said, this is simply not true. NI is just another tax,
> pure and simple. The only reason why it is separate from PAYE is so
> that the government can claim that income tax is only 22%, rather than
> approximately double that, as it is in practice (if you include
> employers' NI as well as employees').
Why is employer's NI (12.8%) higher than the employee's (11%). When you
think that if it wasn't for the employer the employee might be claiming
unemployment, housing and many more benefits. So why is the employer
penalised more for giving someone a wage?
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| Re: QUERY: beginner to PAYE tax & NI [message #383354 ] |
Di, 25 April 2006 19:05 |
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"redwood" <help [at] nooos.com> wrote in message
news:4b71tsFun0j0U1 [at] individual.net...
> Why is employer's NI (12.8%) higher than the employee's (11%). When you
> think that if it wasn't for the employer the employee might be claiming
> unemployment, housing and many more benefits. So why is the employer
> penalised more for giving someone a wage?
Because the employer can be penalised more.
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| Re: QUERY: beginner to PAYE tax & NI [message #383365 ] |
Di, 25 April 2006 19:32 |
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"Adrian Boliston" <adrian [at] boliston.co.uk> wrote in message
news:4b6hfvFvksooU1 [at] individual.net...
> "Tim" <me [at] home.uk> wrote in message
> news:a7-dnZwU-IowmtPZnZ2dnUVZ8qGdnZ2d [at] bt.com...
>
>> "Adrian Boliston" wrote
>>> I've just checked http://www.hmrc.gov.uk/rates/nic.htm
>>> and it looks like the NI rate plummets from 11%
>>> to just 1% for those earning over £645 per week!
>>
>> Yes, of course. It used to "plummet" to zero...
>>
>> "Adrian Boliston" wrote
>>> I guess the government assume they can
>>> afford to go private rather than use the NHS?
>>
>> Or they assume that, once they've paid
>> 11% upto £645pw, they've already
>> paid enough for NHS service etc?
>
> But then why does Income Tax work in the opposite way?
Because it does.
It's interesting to note (well I find it interesting anyway)
that most (if not all) European countries' calculate Social
Security deductions the same way as the UK does
(usually at a somewhat higher percentage).
tim
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| Re: QUERY: beginner to PAYE tax & NI [message #383373 ] |
Di, 25 April 2006 21:41 |
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"Why not simply combine Tax & NI into a single tax and have a 41%
higher rate
and a 33% basic rate? "
It was the principle of 'universal welfare'. Everyone is in the
system,
everyone pays and and everyone can draw when needed. We were all
in the same boat, cradle to grave etc. etc.
The expansion of means testing eroded the principle so that many
think that NI is now more and more indistinguishable from income tax.
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| Re: QUERY: beginner to PAYE tax & NI [message #383383 ] |
Di, 25 April 2006 23:02 |
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"Andy Pandy" <spam8times [at] wonderful.spam.invalid> wrote in message
news:4b6f3uF107tt3U1 [at] individual.net...
>
> "Peter Saxton" <peter [at] petersaxton.co.uk> wrote in message
> news:qvvr429fl32f6se0p16fdadj70g0atgm29 [at] 4ax.com...
>> >A friend told me he got tax discount (3 months of low tax pay) when he
>> >first started his job. He was a student then got a job and stopped
>> >studies. I never got this when I graduated and got a job immediately
>> >afterwards. Is this right?
>>
>> No, not in the scenario you set out.
>
> It might be he got a job 3 months before the end of the tax year - if he
> wasn't
> earning prior to this and the employer got the relevant paperwork on time,
> then he
> would have paid less tax in those 3 months than afterwards.
>
> --
> Andy
>
>
More likely he was a student working in a recognised holiday period and
signed P38(s). However, having ceased to be a student, then the exemption
from tax is withdrawn and normal P46 rules would apply.
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| Re: QUERY: beginner to PAYE tax & NI [message #383385 ] |
Di, 25 April 2006 23:07 |
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"Adam" <nospam [at] nospam.com> wrote in message
news:444e1bf6$0$467$db0fefd9 [at] news.zen.co.uk...
>
> <dhruba.bandopadhyay [at] hotmail.com> wrote in message
> news:1145958827.170645.54680 [at] e56g2000cwe.googlegroups.com...
>> This is regarding UK England. I don't know much about taxes and wanting
>> some more help and advice.
>>
>>
>> Why is my National Insurance contributions different each month? I
>> understand that NI is for NHS and entitles one to NHS hospital
>> treatment.
>
> As others have said, this is simply not true. NI is just another tax, pure
> and simple. The only reason why it is separate from PAYE is so that the
> government can claim that income tax is only 22%, rather than
> approximately double that, as it is in practice (if you include employers'
> NI as well as employees').
Actually, that is not true either. Whilst I agree that the government use
the funds obtained from this source, all Primary Contributions are recorded
against the record of the person paying it. This then records an entitlement
to a state pension, based upon the amount of full contributing years.
The are also other state benefits, such a job seekers allowance, that depend
upon a recorded payment of contributions into the fund. Its known in HMRC as
the Contributory Principle and it is jealosly guarded.
>
> However, one important point to remember in answer to your original
> question is that PAYE is calculated on an annual basis, but NI is
> calculated on a monthly basis (or weekly if you are paid weekly). It is
> quite possible to pay too much PAYE over the year if you changed jobs part
> way through and your new employer didn't fill in the correct forms, so
> it's always worth checking. You should be able to claim back any extra you
> have paid from the Inland Revenue. Phone them up and ask them: they are
> mostly fairly helpful.
Thanks, we try.
> NI is much simpler to calculate, and it is less likely that there will be
> anything to claim back.
>
> HTH
>
> Adam
>
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| Re: QUERY: beginner to PAYE tax & NI [message #383421 ] |
Mi, 26 April 2006 10:52 |
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"Simon" <another [at] spamfree.add> wrote in message
news:444e8fa0_3 [at] mk-nntp-2.news.uk.tiscali.com...
> > As others have said, this is simply not true. NI is just another tax, pure
> > and simple. The only reason why it is separate from PAYE is so that the
> > government can claim that income tax is only 22%, rather than
> > approximately double that, as it is in practice (if you include employers'
> > NI as well as employees').
>
> Actually, that is not true either. Whilst I agree that the government use
> the funds obtained from this source, all Primary Contributions are recorded
> against the record of the person paying it. This then records an entitlement
> to a state pension, based upon the amount of full contributing years.
Yes, and people with no contributing years at all and no other income in retirement
can get the MIG which is considerably higher than the basic state pension, and which
increases in line with earnings rather than inflation.
> The are also other state benefits, such a job seekers allowance, that depend
> upon a recorded payment of contributions into the fund.
But if you have no NI record then you can get income based JSA (subject to means
test), which is exactly the same amount as contributory JSA.
> Its known in HMRC as
> the Contributory Principle and it is jealosly guarded.
Except that you don't need to have paid any NI to get NI credits (for instance if you
earn between the LEL and PT, ie about £90/week).
Also you can end up having to pay considerable NI but end up with no NI credit for
that year (eg a student who earns £3000 over 3 months in a summer job but nothing for
the rest of the year).
--
Andy
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| Re: QUERY: beginner to PAYE tax & NI [message #383425 ] |
Mi, 26 April 2006 11:17 |
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"GSV Three Minds in a Can" <GSV [at] quik.clara.co.uk> wrote in message
news:8qAHZnK$BhTEFA3F [at] from.is.invalid...
> >NI has nothing to do with the NHS. It's supposed to be an insurance
> >which entitles
>
> =WAS= supposed to be, maybe. These days you are not allowed to starve
> regardless of whether you have NI contributions or not. Actually you're
> sometimes better off if you don't have, iirc.
I don't think you can ever be better off through *not* having an NI record.
It's true that some means tested benefits are more generous than their contributory
equivalents (eg the MIG, JSA for a couple), but where this is the case you can claim
the means tested element to top up the contributory element you're already getting.
It may make the contributory element completely worthless though.
> >you to claim benefits such as unemployment benefit (JSA), state pension, SERPS,
> >maternity/paternity pay etc.
> >
> >But as most benefits are flat rate whereas most contributions are
> >percentages of
> >salary, as you can claim for events which you caused deliberately (eg
> >pregnancy), as
> >it is compulsory, and as there are means tested alternatives to most
> >benefits which
> >you can get if you paid no premiums, it is clearly now a tax rather than an
> >insurance.
>
> Likewise SERPS, Graduated Pension, and various other things which have
> gone down the government plughole over the years. The whole concept of
> 'you gets what you paid for' is completely foreign to governments which
> believe 'you pays what (we think) you can afford, you gets what (we
> think) you need'.
A better summary would be 'you pay regardless of how much you can afford, you get
what helps up achieve some bullshit targets'.
--
Andy
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| Re: QUERY: beginner to PAYE tax & NI [message #383439 ] |
Mi, 26 April 2006 12:53 |
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Quite! It's a question I would like answered. As I IT contrator I get
clobbered for 40% tax, 12.8% Employers NI and 11% Employees NI because
much of the work I do (Goverment stuff) does is not IR35 exempt.
It's daylight robbery. Effectively I pay 63.8% of what I earn in tax.
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| Re: QUERY: beginner to PAYE tax & NI [message #383440 ] |
Mi, 26 April 2006 12:58 |
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Again, this contributory principle is unpricipled. As a contractor I
get gaps in my work/contributions so unless I make voluntary NI
payments when I am out of work I cannot get any benefits and yet I pay
huge amounts more than Jo Blogss down the road. He pays 10% tax and
minimal NI 50 weeks of the year - probably less than half of what I pay
- he gets benefits when unemployed - I get nothing.
I believe this should be set on an amount paid - say the national
minimum wage amount + 20% rather than on continuous contribution.
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| Re: QUERY: beginner to PAYE tax & NI [message #383444 ] |
Mi, 26 April 2006 13:13 |
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"nagsman" wrote
> As I IT contrator I get clobbered for 40% tax, 12.8%
> Employers NI and 11% Employees NI because much of
> the work I do (Goverment stuff) does is not IR35 exempt.
>
> It's daylight robbery. Effectively I pay 63.8% of what I earn in tax.
No, it's more like 47.7% of what you earn paid on tax & NI.
Each £112.80 gives £100 extra "gross salary" hence
£59 extra "net salary" which is 52.3% of £112.80.
[If you pay 40% IT, then your
marginal NI rate will be only 1%.]
Even if the NI were 11% with IT at 40%,
it would be only 56.6% (not 63.8%).
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| Re: QUERY: beginner to PAYE tax & NI [message #383447 ] |
Mi, 26 April 2006 13:18 |
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"Tim" <me [at] home.uk> wrote in message news:yrGdna3o7veYy9LZRVnyvQ [at] bt.com...
> [If you pay 40% IT, then your
> marginal NI rate will be only 1%.]
Usually, but not always, for instance if you have a large amount of taxable benefits
(eg company car).
--
Andy
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| Re: QUERY: beginner to PAYE tax & NI [message #383456 ] |
Mi, 26 April 2006 14:36 |
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Tim wrote:
> "nagsman" wrote
>> As I IT contrator I get clobbered for 40% tax, 12.8%
>> Employers NI and 11% Employees NI because much of
>> the work I do (Goverment stuff) does is not IR35 exempt.
>>
>> It's daylight robbery. Effectively I pay 63.8% of what I earn in tax.
>
> No, it's more like 47.7% of what you earn paid on tax & NI.
>
> Each £112.80 gives £100 extra "gross salary" hence
> £59 extra "net salary" which is 52.3% of £112.80.
> [If you pay 40% IT, then your
> marginal NI rate will be only 1%.]
>
> Even if the NI were 11% with IT at 40%,
> it would be only 56.6% (not 63.8%).
Alternatively, though, it could be argued that he pays
(112.8-59)/59 = 91.2% or even (112.8-49)/49 = 130.2% of
"what he earns [net]" in tax.
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| Re: QUERY: beginner to PAYE tax & NI [message #383464 ] |
Mi, 26 April 2006 15:19 |
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redwood wrote:
> "Adam" <nospam [at] nospam.com> wrote in message
>> As others have said, this is simply not true. NI is just another tax,
>> pure and simple. The only reason why it is separate from PAYE is so
>> that the government can claim that income tax is only 22%, rather than
>> approximately double that, as it is in practice (if you include
>> employers' NI as well as employees').
>
> Why is employer's NI (12.8%) higher than the employee's (11%). When you
> think that if it wasn't for the employer the employee might be claiming
> unemployment, housing and many more benefits. So why is the employer
> penalised more for giving someone a wage?
Neither is penalised more than the other. It makes no difference who
pays what. You could have the employer paying nothing, and the employee
paying all the £23.80 out of every £112.80 available in the employer's
budget. If the employee were then still to pay £22 income tax and keep
£67, it would even keep the spin doctors happy, because they could claim
the income tax rate were 22/112.8 = 19.5% instead of 22%. I can't think
why Treasury hasn't thought of that.
Although the employee's perceived NI would have gone up from 11% to 23.8%,
there'd've been a 12.8% rise in his nominal salary to make up for it.
Or you could have the employer paying the whole £23.80 and giving the
employee £89 of which he'd have to pay £22 tax. That's 24.7% but the
spin doctors could still claim that the combined employee-visible
(tax+NI) take would have gone down from 33% to below 25%. Smiles all
round until the employee realises he's had an 11% cut in his nominal
salary.
It's swings and roundabouts. If you employ someone, it'll cost you
£112.80 for every £67 the employee gets to keep. It makes no difference
whether you view that as a tax on employing, as a tax on being employed,
or as a mixture. It happens to be nominally a mixture, which I suppose
is designed that way so as to maximise the government's opportunity to
employ administrators to run the scheme.
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| Re: QUERY: beginner to PAYE tax & NI [message #383471 ] |
Mi, 26 April 2006 17:22 |
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On 26 Apr 2006 03:53:46 -0700, "nagsman" <pat.bryant [at] ukonline.co.uk>
wrote:
>Quite! It's a question I would like answered. As I IT contrator I get
>clobbered for 40% tax, 12.8% Employers NI and 11% Employees NI because
>much of the work I do (Goverment stuff) does is not IR35 exempt.
>
>It's daylight robbery. Effectively I pay 63.8% of what I earn in tax.
Are you sure your work is IR35 caught?
Just because it is government work, that does not necessarily mean it
is caught.
If you spend your time working fixed hours, doing just what your boss
tells you, and you get paid for any lulls in the work, and have no
right of substitution, then the odds are you are caught.
But if any of those are not true, there is a good chance you could be
outside.
But of the investigations that have been handled through the PCG
insurance, there have been 1,231. Of which just *3* have ended up
paying IR35 tax. The other 1,228 have been found to be outside.
--
Alex Heney, Global Villager
How do you make Windows faster ? Throw it harder
To reply by email, my address is alexATheneyDOTplusDOTcom
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| Re: QUERY: beginner to PAYE tax & NI [message #383485 ] |
Mi, 26 April 2006 19:37 |
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"nagsman" <pat.bryant [at] ukonline.co.uk> wrote in message
news:1146049128.629352.165390 [at] e56g2000cwe.googlegroups.com...
> Again, this contributory principle is unpricipled. As a contractor I
> get gaps in my work/contributions so unless I make voluntary NI
> payments when I am out of work I cannot get any benefits and yet I pay
> huge amounts more than Jo Blogss down the road. He pays 10% tax and
> minimal NI 50 weeks of the year - probably less than half of what I pay
> - he gets benefits when unemployed - I get nothing.
>
> I believe this should be set on an amount paid - say the national
> minimum wage amount + 20% rather than on continuous contribution.
Are you sure you're handling NI correctly - or aren't you a director of your
company?
--
Martin
[Remove barrier to reply]
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| Re: QUERY: beginner to PAYE tax & NI [message #383502 ] |
Mi, 26 April 2006 21:09 |
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dhruba.bandopadhyay [at] hotmail.com wrote:
> This is regarding UK England. I don't know much about taxes and wanting
> some more help and advice.
>
> I understand that the PAYE tax rate is 22%?
>
> Is it true that one can reclaim his tax payments back for a tax year if
> he earned less than 10,000 during that tax year. Is it correct that
> it's to do with how much one earned during that tax year, and not how
> much you would've earned if you worked for a whole tax year?
You might get some of it back, but almost certainly not all of it. If you
were working at the end of the tax year, you probably won't get anything
back, otherwise, you may have overpaid as the tax is deducted on the
assumption you will continue to earn at the same rate until the end of the
tax year.
This could apply even if you earned more than £10,000 in the year.
You get the total employment income from your P45 / P60.
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| Re: QUERY: beginner to PAYE tax & NI [message #383503 ] |
Mi, 26 April 2006 21:05 |
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Andy Pandy wrote:
> But if you have no NI record then you can get income based JSA (subject to
> means test), which is exactly the same amount as contributory JSA.
Except, I believe for the savings limit.
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| Re: QUERY: beginner to PAYE tax & NI [message #383504 ] |
Mi, 26 April 2006 21:05 |
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nagsman wrote:
> Quite! It's a question I would like answered. As I IT contrator I get
> clobbered for 40% tax, 12.8% Employers NI and 11% Employees NI because
> much of the work I do (Goverment stuff) does is not IR35 exempt.
>
> It's daylight robbery. Effectively I pay 63.8% of what I earn in tax.
On the 40% tax band, you pay 1% employee's NI.
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| Re: QUERY: beginner to PAYE tax & NI [message #383506 ] |
Mi, 26 April 2006 21:54 |
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"Martin" <ngng [at] ngngng.BARRIER.fsnet.co.uk> wrote in message
news:MdO3g.42$ZB4.41 [at] newsfe7-win.ntli.net...
>
> "nagsman" <pat.bryant [at] ukonline.co.uk> wrote in message
> news:1146049128.629352.165390 [at] e56g2000cwe.googlegroups.com...
>> Again, this contributory principle is unpricipled. As a contractor I
>> get gaps in my work/contributions so unless I make voluntary NI
>> payments when I am out of work I cannot get any benefits and yet I pay
>> huge amounts more than Jo Blogss down the road. He pays 10% tax and
>> minimal NI 50 weeks of the year - probably less than half of what I pay
>> - he gets benefits when unemployed - I get nothing.
>>
>> I believe this should be set on an amount paid - say the national
>> minimum wage amount + 20% rather than on continuous contribution.
>
> Are you sure you're handling NI correctly - or aren't you a director of
> your company?
>
> --
> Martin
>
> [Remove barrier to reply]
Judging from his English, he seems more like a student in secondary school.
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| Re: QUERY: beginner to PAYE tax & NI [message #383511 ] |
Mi, 26 April 2006 22:38 |
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Martin (ngng [at] ngngng.BARRIER.fsnet.co.uk) gurgled happily, sounding much
like they were saying :
> Are you sure you're handling NI correctly - or aren't you a director
> of your company?
I suspect an umbrella. Probably not a very good one at that.
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| Re: QUERY: beginner to PAYE tax & NI [message #383523 ] |
Do, 27 April 2006 00:34 |
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Simon wrote:
> Judging from his English, he seems more like a student in secondary
> school.
That's an oxymoron (or an americanism, which amounts to the
same thing).
Someone who attends college or university is a student.
Someone who attends school isn't.
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| Re: QUERY: beginner to PAYE tax & NI [message #383553 ] |
Do, 27 April 2006 08:56 |
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"Ronald Raygun" <no.spam [at] localhost.localdomain> wrote in message
news:QzS3g.60215$wl.56298 [at] text.news.blueyonder.co.uk...
> Simon wrote:
>
>> Judging from his English, he seems more like a student in secondary
>> school.
>
> That's an oxymoron (or an americanism, which amounts to the
> same thing).
>
> Someone who attends college or university is a student.
> Someone who attends school isn't.
>
Sorry Ronald, cant find an age limit. P38(s) asks for Name of School or
College. So provided that this was restricted to periods between recognised
Terms, then I would allow this irrespective of age, just must be in full
time education.
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| Re: QUERY: beginner to PAYE tax & NI [message #383574 ] |
Do, 27 April 2006 12:58 |
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"Jonathan Bryce" <jonathan [at] localhost.localdomain> wrote in message
news:1ss4i3-qpc.ln1 [at] michelle.jbryce...
> Andy Pandy wrote:
>
> > But if you have no NI record then you can get income based JSA (subject to
> > means test), which is exactly the same amount as contributory JSA.
>
> Except, I believe for the savings limit.
There's no savings limit for contributory JSA (although if you are getting a pension
it can be reduced). There is a savings limit for income based JSA, which is which I
wrote "subject to means test".
It used to be the case that contributory JSA was worth more than income based JSA,
making the contributions worth something even to people with no savings.
--
Andy
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| Re: QUERY: beginner to PAYE tax & NI [message #383586 ] |
Do, 27 April 2006 15:08 |
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Simon wrote:
> "Ronald Raygun" <no.spam [at] localhost.localdomain> wrote in message
> news:QzS3g.60215$wl.56298 [at] text.news.blueyonder.co.uk...
>> Simon wrote:
>>
>>> Judging from his English, he seems more like a student in secondary
>>> school.
>>
>> That's an oxymoron (or an americanism, which amounts to the
>> same thing).
>>
>> Someone who attends college or university is a student.
>> Someone who attends school isn't.
>
> Sorry Ronald, cant find an age limit. P38(s) asks for Name of School or
> College. So provided that this was restricted to periods between
> recognised Terms, then I would allow this irrespective of age, just must
> be in full time education.
I didn't mean to imply there was an age limit, I'm just criticising the
trendy fashion to refer to pupils as students in a misguided attempt to
make them feel more grown up and responsible.
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| Re: QUERY: beginner to PAYE tax & NI [message #383623 ] |
Do, 27 April 2006 22:18 |
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Andy Pandy wrote:
>> Except, I believe for the savings limit.
>
> There's no savings limit for contributory JSA (although if you are getting
> a pension it can be reduced). There is a savings limit for income based
> JSA, which is which I wrote "subject to means test".
>
> It used to be the case that contributory JSA was worth more than income
> based JSA, making the contributions worth something even to people with no
> savings.
You start losing Income based JSA at £6,000 savings and it goes completely
at £16,000. My savings are above that level, so I would have to rely on
contributory JSA.
Also, your partner's income affects entitlement to income based JSA but not
contribution based JSA.
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| Re: QUERY: beginner to PAYE tax & NI [message #383638 ] |
Fr, 28 April 2006 01:53 |
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"Jonathan Bryce" <jonathan [at] localhost.localdomain> wrote in message
news:dhl7i3-3qs.ln1 [at] michelle.jbryce...
> > There's no savings limit for contributory JSA (although if you are getting
> > a pension it can be reduced). There is a savings limit for income based
> > JSA, which is which I wrote "subject to means test".
> >
> > It used to be the case that contributory JSA was worth more than income
> > based JSA, making the contributions worth something even to people with no
> > savings.
>
> You start losing Income based JSA at £6,000 savings and it goes completely
> at £16,000. My savings are above that level, so I would have to rely on
> contributory JSA.
>
> Also, your partner's income affects entitlement to income based JSA but not
> contribution based JSA.
Well exactly. The point is that contributory benefits are generally only useful for
people with savings or other income. For people without then they are generally
useless as means tested benefits will replace them.
--
Andy
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