As an employee within the United Kingdom, you will need to pay both income tax and national insurance on your wages.
Disclaimer: Tax figures are always open and to change and Her Majesty’s Revenue and Customs (HMRC) assesses everyone’s personal circumstances within personal tax codes and so this article is purely a guideline.
How do I know if I need to pay tax?
Every person is entitled to a tax-free Personal Allowance of £11,850 for the year (this is set to increase to £12,500 in the tax year of 2019-20).
How much tax do I have to pay if I earn over the Personal Allowance?
In the UK, the tax system is based on marginal tax brackets. This means that the amount you are taxed is worked out based on the income you earn against certain thresholds.
As a UK employee:
You will pay 0% of tax on incomes up to £11,850 (£12,500 for 2019-20)
Then you will pay 20% on anything you earn between £11,851 and £46,350 (£12,501-£50,001 for 2019-20)
You will pay 40% Income Tax on anything you earn between £46,351 to £150,000) (£50,001-£150,000 for 2019-20).
If you earn over £150,001 and over, you pay 45% tax
Examples of take-home pay for a doctor
Annual Salary (before tax)
Monthly take home (after tax)
Please click here to work out your exact take-home pay with a salary calculator.
Paying tax on foreign income
You may need to pay UK income tax on foreign income. For example:
Foreign investments and savings interest
Rental income on overseas property
Income from pensions held overseas
This income includes anything from outside of England, Scotland, Wales and Northern Ireland.
What is a National Insurance contribution?
You will also be required to pay a national insurance contribution on your earnings to help build your entitlement to certain state benefits, such as the State Pension and Maternity Allowance.
Dissimilar to income tax, national insurance is not an annual tax. You begin to pay National Insurance once you earn more than £162 a week and it applies to your pay each pay period (i.e. monthly, weekly etc). This means that if you earn extra in one month, you will pay extra national insurance.
Your National Insurance contributions will be:
12% of your weekly earnings between £162 and £892
2% of your weekly earnings if you earn above £892
Please note, your National Insurance contributions will be taken off along with Income Tax before your employer pays your wages.
How do I pay my tax and national insurance contribution?
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).
Where does UK taxpayer’s money go?
The money is used to help provide funding for public services such as the NHS, the education and welfare system as well as investment in public projects, such as roads, rail and housing.
Personal Savings Allowance
When you open a UK bank account, you can also earn some income from your savings without paying tax.
If you pay a basic tax rate, then you can earn up to £1,000 in tax-free savings. Higher rate taxpayers can earn up to £500.
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Moneyadviceservice.org.uk. (2019). How much Income Tax and National Insurance you should pay. [online] Available at: https://www.moneyadviceservice.org.uk/en/articles/tax-and-national-insurance-deductions [Accessed 1 Feb. 2019].
S, H. (2019). Tax Rates 2018/19. [online] MoneySavingExpert.com. Available at: https://www.moneysavingexpert.com/banking/tax-rates/ [Accessed 1 Feb. 2019].