As a doctor moving to the UK, you are probably wondering how much tax you’ll pay on your income and how the UK tax system works. You might have heard about personal allowances and national insurance too. It can all seem very confusing however this article will give you all the information you need on the various tax brackets and exactly how much tax you’ll pay depending on your job title and grade within the NHS.
Before we dive in it’s important to note that tax figures are set by the UK government in their regular budget announcements. Tax can be a complicated area so this article focusses in on the core principles of income tax, personal allowances and national insurance from the viewpoint of an NHS doctor. For other areas of tax like self-employment or capital gains then you should consult the relevant areas of the gov.uk websites.
Income tax in the UK is the basic tax that you pay on any money you earn during a particular year whilst working either as an employee or from self-employment. Income tax is the UK treasuries’ main source of revenues and is used to fund public services including the NHS, education, welfare and public projects such as rail and housing. There are some allowances and reliefs that can be claimed however for the purpose of a doctor employed by the NHS, you’ll be subject to the standard rates of income tax.
The tax year commences on the 6th April each year and ends on the 5th April the following year. This means if you come to the UK part way through a tax year you may find yourself in the lower brackets for your first year if you don’t accrue enough income in that time. Most countries align with the calendar year however UK tradition has used these dates since 1800 when the treasury chose to use the Gregorian calendar and account for leap years to ensure no loss of tax revenues – it has remained that way ever since!
Every person is entitled to a tax-free Personal Allowance of £12,570 for the year (2022-23). This means that if you earn under this amount during the tax year, you won’t pay any income tax at all. Equally if you earn beyond this amount, you still won’t pay any tax on the first £12,570 of your income.
You don’t need to do anything to apply for the personal allowance and it will all be calculated automatically in your payslip. Note that since the NHS run monthly payroll, your tax free allowance is spread out across all of your payslips rather than you receiving it all at the beginning of the tax year. Changes to your income are automatically reported to HMRC and if you’ve overpaid or underpaid the amounts will come back to you in future payslips.
The reality is that you’re likely to be earning far more than the personal allowance if you’re working as a doctor in the NHS unless you are part time. Beyond the personal allowance, tax is calculated in marginal bands or brackets which increase in percentage as your income goes up. The system is designed to be as fair as possible for society so that those who earn the most also contribute the most in tax.
Every UK employee, including doctors pays tax in the following bands or brackets:
|Income Tax Band||Taxable Income||Tax Rate|
|Personal Allowance||£0 - £12,570||0%|
|Basic Rate||£12,571 - £50,270||20%|
|Higher Rate||£50,271 - 150,000||40%|
|Additional Rate||Over £150,000||45%|
0% on first £12,570 = £0Note that total income will be taxed at one or more of these increments as you progress through them. Here is a worked example for a doctor earning £70,000 per annum:
In addition to income tax, every employee earning more than £242 per week contributes towards National Insurance. It is similar to income tax however National Insurance is used to help individuals when they need help the most, for example when they fall unemployed, unwell or when they retire from work altogether. It is also calculated weekly rather than annually so can fluctuate if your income changes between payslips.
The brackets for National Insurance can be calculated as follows:
|Income||National Insurance Rate|
|£0 - £242 per week||0%|
|£242 - £967 per week||12% (from 6th November 2022|
|Over £967 per week||3.25%|
When you start work, your employer and HRMC will notify you of your tax code. Everyone is assigned one and it determines how your tax gets calculated in each payslip. The standard tax code at the moment is 1257L and most of you will end up on this tax code. The L indicates that you’re entitled to the standard tax free personal allowance and the 1257 corresponds to the £12,570 allowance. Variations to this arise when you take on a second job, receive a pension income or if you’re placed on an emergency code in your first job. Don’t worry too much if your code is incorrect to begin with. It usually sorts itself out and any over or underpayments come back to you in later payslips.
Fortunately, it isn’t complicated in practise and the UK government have provided this online calculator in which you can enter your income and reveal your take-home pay.
So you’re probably wondering what this means for you depending on the kind of job you’re applying to. The following table gives take home pay calculations for various job titles based on the basic salaries outlined in the most recent NHS pay circular. Note that these are based on the minimum points on the scale with no uplifts or on-call allowances added on. We have also not included any pension contributions and assumed a normal 1257L tax code:
|Job Title||Basic Salary||Take-Home Pay|
|Foundation Year 1||£29,384||£23,436|
|Foundation Year 2||£34,012||£26,526|
|Speciality Registrar (CT1/2)||£40,257||£30,694|
|Speciality Registrar (ST3+)||£51,017||£37,800|
|SPR with 5 years experience (Old Pay Scale)||£44,705||£33,663|
If your Personal Allowance is spread out evenly across your wages for the year, then your tax and national insurance contributions should be taken before you are paid. The UK Government know how much to take through a system called PAYE (pay as you earn). So in essence, you’ll receive a payslip with a breakdown of all deductions and the final take-home amount is paid to your bank account.
This is a subjective question and, of course, there will be many factors in play when determining how much your living expenses are. That said, the average salary in the UK in July 2022 was £31,876 so all levels of doctor are paid above the average salary, particularly when factoring in on-call and anti-social hours uplifts and allowances. You should also be aware that you’ll easily be able to pick up overtime in the form of bank or locum shifts and these are often quite lucrative with higher pay rates sometimes available. The top 10% of workers in the UK earn £62,583 per year so most doctors working at or towards registrar level will fall in that bracket.
In summary, income tax can seem like a daunting topic and the UK tax system can be intricate and full of nuances. The main takeaway points are:
If you’d like to ask us a question or get in touch then we’re always available on email via [email protected] or on any of our social channels:
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