How Much Income Tax And National
Insurance You Need To Pay?

Being an employee, you pay Income Tax and National Insurance on your earnings through the PAYE system. You must make sure about having the right tax code and paying the exact amount.

For an employee, it is important to understand the tax structure, as an imprecise understanding of the structure can lead to the usage of wrong tax code and tax payment and National Insurance. Each employee pays income tax and National Insurance (NI) on the wages through the pay-as-you-earn system (PAYE) system. At the same time, it is not viable to expect owner managed businesses to have an exhaustive knowledge of the tax structure and National Insurance rules. DNS Accountants, with years of experience, can help businesses with their tax planning and computation of tax and National Insurance (NI) contributions.

Self-employed individuals pay income tax on business profits and after a self assessment tax return is filed, tax is due on profits generated during the prior 12-month accounting period. The self assessment tax return must be completed each year. Individuals must also pay Class 2 NICs and Class 4 NICs. For 2019-2020, Class 2 NICs works upto a flat-rate of £3 per week if your profits are £6,365 or more a year which is collected by means of self-assessment. Class 4 NICs are linked to profits and for 2019-2020, the lower and upper limits are is £8,632, and £50,000 respectively.

Tax Rates And Bands in 2019/20

Tax Rate* Income after allowances 2019 to 2020 Income after allowances 2018 to 2019

Basic tax rate (20%)

Up to £37,500

Up to £34,500

Higher tax rate (40%)

£37,501 to £150,000

£34,501 to £150,000

Additional tax rate (45%)

Over £150,000

Over £150,000

*These rates are applied after the tax free allowance has been deducted from the gross wage

For instance, if your yearly earning is £52,000, you pay:

On the first £12,500 you don’t need to pay anything

On the next £37,500 you have to pay 20% (££7,500.00)

On the next £2,000 you’re required to pay 40% (£800)

The National Insurance pay depends on the employment status and the amount an individual earns. Individuals will end up paying less if she is a married woman or widow along with a legitimate “certificate of election”; or he / she is rescheduling NI because of multiple jobs. For 2016-2017, the Class 1 NIC rates are as follows:

For 2019-2020, the Class 1 NIC rates are as follows: -

Individual’s pay Class 1 NI rate

£155 – £827 for a week


Greater than £962 per week


What is a Tax code?

The tax payable depends on an individual’s income and the amount of tax paid during the year. Tax codes depend on an individual’s circumstance and vary from people to people. Each year the HMRC sends a notice with information regarding tax code and the amount of tax paid. Tax code can also be found on the pay-slip. The tax code comprises of numbers and letters. The tax code is usually the tax-exempt amount an individual can earn which is divided by 10, with a post-fixed alphabet. For a better understanding, assume that the tax code is 1250L, which means 1250 turns into £12,500 earned before tax.

  • For more than one source of income, the tax code might have no number and begin with the alphabet “D” followed by numeric digits. In such cases, personal allowance is treated as the main income source, and everything earned from second income source is taxable
  • Tax code starting with alphabet “K” means that tax is due since the past year, or an individual receives money that can’t be taxed (e.g. State pension)

Sometimes the tax code isn’t right. Individuals who are on a new / first job and their correct tax code has not been mapped before the first pay-day, might be on an ‘emergency tax code’. This means an employee will be given a Personal Allowance that may not be the correct one. To make sure if the tax code is correct, match the tax code with the personal allowance an individual is getting. For any doubt regarding the tax code, please contact HMRC or specialized tax professional like DNS Accountant to resolve the tax issue.

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How To Pay Tax in the UK for year 2019/20

Employers usually deduct the National Insurance from the wage and it is paid with taxes. The National Insurance (NI) contribution is shown on the pay-slip. A director of a limited company might be an employee of the company and is liable to pay Class 1 NI through PAYE payroll. Let’s understand certain circumstances:

  • A self-employed must pay Class 2 and Class 4 NI depending on the income. People with special jobs such as businesses related to land or property do not pay Class 2 NIC
  • In case of multiple jobs, the employer will deduct Class 1 NI from the wage and the employee will pay Class 2 and 4 payments for his / her self-employed assignment

How is tax and National Insurance paid

Tax is payable if income is greater than the personal allowance in a year. The employer takes out the tax amount before giving the pay. The employer computes the tax through the pay-as-you-earn system.

Employer will also deduct National Insurance from the pay. National Insurance (NI) is computed on a weekly or monthly basis, or however frequently the employee is paid.

How Much Income Tax Will I Pay

The amount of money individual earns is referred to as the gross pay. The amount left after subtracting deductions like NI and tax is the Net pay. As an employee, individuals are liable to pay:

  • NIC if earnings are more than £166 a week
  • 12% of earnings higher than the limit, and up to £962 a week
  • The rate drops to 2% of earnings over £962 a week

How much tax will I pay calculator

For instance, in case you’re earning £1,000 per week, you pay:

  • On the first £166 you’re not required to pay anything
  • On the next £796 you’ll have to pay 12% (£95.52)
  • On the next £38 you need to pay 2% (£0.76)

How Much Tax Will I Pay – Self Employed Calculator UK

To understand how much tax is due in the United Kingdom, let’s consider an example to understand the concept better.

  • Firstly, the personal allowance is computed on the individual’s income. The personal allowance computation depends on the tax-code the individual has received from HMRC
  • National Insurance is charged individually and it is charged against income above £166 per week

How Much Tax Will I Pay – Self Employed Calculator UK

Let’s understand how much tax will be paid on wages through an example. Let us assume the annual wage of an individual to be £24,000.

Particulars Values

Monthly wage (£24,000/12)


Tax computation


Personal allowance :


Taxable income


Basic rate tax @ 20%




National Insurance computation


Income up to Primary threshold


Income subject to National Insurance @ 12%


National Insurance contribution




Net Pay computation


Monthly Salary (£24,000/12)


Basic rate tax @ 20%


National Insurance contribution


Take home pay


Tax-planners for business / employees – dns accountants

DNS Accountants is an experienced taxation and accounting firm in the United Kingdom, which offers entire range of tax planning services for owner-managed businesses and individuals across the country. DNS helps individuals understand their tax structure and compute the amount of tax payable. The team at DNS comprises of Chartered Accountants, and accounting and MBA professionals that help clients with their tax credits and services such as bookkeeping, auto-enrolment, accounting, self-assessment, and payroll-management and business start-up. Employees / employers can use DNS Accountants online pay calculator to have better understanding of their pay structure. The firm is very principled & delivers supreme customer service and client support. Use our HMRC Tax Calculator & Self Employed Tax Calculator

DNS Accountants help clients focus on maximizing their wealth. It’s impractical to expect any small-business owner to have a comprehensive knowledge of tax and National Insurance rules, DNS Accountants work with employees / businesses to work out their tax and National Insurance contributions.

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