WHAT WE'RE DOING:
In this lesson we were discussing taxes. We were talking about taxable incomes, tax-free allowances, how much income tax we pay, how we pay it.
As well as tax we discussed National Insurance. Things like N I contributions, who pays N I, how much N I we pay. And basically how our overall tax and N I is worked out.
Calais was talking about it while we were taking notes. He also had a slideshow full of so much information.
MY NOTES and WHAT I UNDERSTAND - TAX:
I didn't know that we got taxed on so much different things. We get tax on earnings for employment, earnings from self-employment, pensions, savings, shares, rental income and trust funds.
I was so surprised at how much money 'they' take from us. I always thought that things like our pensions, savings and trust funds we got all of. But it turns out that they even take money from them.
We then went on to talk about tax-free allowances and how much income tax we pay. I all ready knew that a lot, if not everyone who is a UK resident receives a personal allowance. And that's money that we are allowed to earn each year tax-free.
This was a table Calais showed us about how much income tax we pay. So if I were to have a job that payed about £8000-£12000 a year, then it wouldn't bother me too much.
In this lesson we were discussing taxes. We were talking about taxable incomes, tax-free allowances, how much income tax we pay, how we pay it.
As well as tax we discussed National Insurance. Things like N I contributions, who pays N I, how much N I we pay. And basically how our overall tax and N I is worked out.
Calais was talking about it while we were taking notes. He also had a slideshow full of so much information.
MY NOTES and WHAT I UNDERSTAND - TAX:
I didn't know that we got taxed on so much different things. We get tax on earnings for employment, earnings from self-employment, pensions, savings, shares, rental income and trust funds.
I was so surprised at how much money 'they' take from us. I always thought that things like our pensions, savings and trust funds we got all of. But it turns out that they even take money from them.
We then went on to talk about tax-free allowances and how much income tax we pay. I all ready knew that a lot, if not everyone who is a UK resident receives a personal allowance. And that's money that we are allowed to earn each year tax-free.
This was a table Calais showed us about how much income tax we pay. So if I were to have a job that payed about £8000-£12000 a year, then it wouldn't bother me too much.
He then went onto explaining that tax is collected depending on the type of income we get and if we are employed, self-employed or not working. The different ways income tax is taken from us are:
-'PAYE (Pay As You Earn)' which is just taken from us as soon as we earn the money.
-'Self Assessment' which is if I am self-em[ployed, I would be responsible for filling in a self assessment tax form to pay tax.
-Tax is deducted from bank/building society internets.
-One-off payments
MY NOTES and WHAT I UNDERSTAND - NATIONAL INSURANCE:
So on top of tax we have to pay N I (National Insurance) which I thought was crazy. I think it's scary how much money they take from us. I can;t imagine what everyone would be like if they earned their full payment.
The amount of national insurance I pay depends on how much I earn and whether I'm employed or self-employed. And I stop paying it when I reach retirement age.
I found out a lot more about N I. I now sort of know that I pay N I contributions if I an employee or self-employed and if I'm 16 or over.
Some people also pay voluntary National Insurance contributions. So apparently we can chose not to pay them if we:
-Aren't working and aren't claiming state benefits.
-Haven't paid enough N I contributions in a year to count for the state pension or other long term sate benefit.
-Live abroad and want to maintain your state benefit entitlement.
The N I number is a personal 'account' number. It makes sure that the N I contributions and tax are kept recorded on your account. And of course It's also a reference number for the whole social security system.
If I was employed and I earned between £146-£817 a week. Then I would have to pay 12% of the amount I earn.
If my income is a lower rate then my contributions are deducted from my wages by my employer. So if I am working as an employee then I would pay through the method of 'PAYE.' My employer would deducted the money before I receive the payment.
I thought this way (the lower rate pay) was a much more easier way to deal with N I contributions.
This is the one that would apply to me mostly. If I'm self-employed there are two different ways to pay, class 2 and class 4.
Class 2 - National Insurance contributions are £2.65 a week.
Class 4 -National Insurance contributions are paid as a percentage of the annual taxable profits. So 9% on profits between £7,605 and £42,475, and another 2% on profits over that amount.
Here it starts to get a bit more complicated just because there are a lot of numbers and percentages involved.
If I earned both employment and self-employment then the total amount of tax and N I contributions I pay would be based on my combined income from both jobs.
WHAT I THOUGHT:
I thought this lesson was very beneficial. At times it was hard to understand what Calais was talking about but I managed to work things out.
The only reason this lesson was quite complicated was because I never knew how much tax and N I we have to pay. We give away so much of our money it's very surprising.
I thought that finding out the amount of N I and tax we have to pay was pretty easy to follow.
This lesson has helped me so much. In just one hour I have learned so much about tax and N I. Two things which I didn't really have a clue about before I came to this lesson.
This is going to help me further my career as a musician because now I know what I have to do with my earnings before I spend them. Also I know how much money they will take from me.
And paying tax and N I when I am self-employed would be a little bit more complicated than being employed but after this lesson I have a ruff idea.
-'PAYE (Pay As You Earn)' which is just taken from us as soon as we earn the money.
-'Self Assessment' which is if I am self-em[ployed, I would be responsible for filling in a self assessment tax form to pay tax.
-Tax is deducted from bank/building society internets.
-One-off payments
MY NOTES and WHAT I UNDERSTAND - NATIONAL INSURANCE:
So on top of tax we have to pay N I (National Insurance) which I thought was crazy. I think it's scary how much money they take from us. I can;t imagine what everyone would be like if they earned their full payment.
The amount of national insurance I pay depends on how much I earn and whether I'm employed or self-employed. And I stop paying it when I reach retirement age.
I found out a lot more about N I. I now sort of know that I pay N I contributions if I an employee or self-employed and if I'm 16 or over.
Some people also pay voluntary National Insurance contributions. So apparently we can chose not to pay them if we:
-Aren't working and aren't claiming state benefits.
-Haven't paid enough N I contributions in a year to count for the state pension or other long term sate benefit.
-Live abroad and want to maintain your state benefit entitlement.
The N I number is a personal 'account' number. It makes sure that the N I contributions and tax are kept recorded on your account. And of course It's also a reference number for the whole social security system.
If I was employed and I earned between £146-£817 a week. Then I would have to pay 12% of the amount I earn.
If my income is a lower rate then my contributions are deducted from my wages by my employer. So if I am working as an employee then I would pay through the method of 'PAYE.' My employer would deducted the money before I receive the payment.
I thought this way (the lower rate pay) was a much more easier way to deal with N I contributions.
This is the one that would apply to me mostly. If I'm self-employed there are two different ways to pay, class 2 and class 4.
Class 2 - National Insurance contributions are £2.65 a week.
Class 4 -National Insurance contributions are paid as a percentage of the annual taxable profits. So 9% on profits between £7,605 and £42,475, and another 2% on profits over that amount.
Here it starts to get a bit more complicated just because there are a lot of numbers and percentages involved.
If I earned both employment and self-employment then the total amount of tax and N I contributions I pay would be based on my combined income from both jobs.
WHAT I THOUGHT:
I thought this lesson was very beneficial. At times it was hard to understand what Calais was talking about but I managed to work things out.
The only reason this lesson was quite complicated was because I never knew how much tax and N I we have to pay. We give away so much of our money it's very surprising.
I thought that finding out the amount of N I and tax we have to pay was pretty easy to follow.
This lesson has helped me so much. In just one hour I have learned so much about tax and N I. Two things which I didn't really have a clue about before I came to this lesson.
This is going to help me further my career as a musician because now I know what I have to do with my earnings before I spend them. Also I know how much money they will take from me.
And paying tax and N I when I am self-employed would be a little bit more complicated than being employed but after this lesson I have a ruff idea.