💼 Understanding UK Income Tax: What First-Time Earners Need to Know

by Soniya Basu | Apr 21, 2025 | Finance & Banking, Settling in the UK

(Because adulting just got real, and HMRC doesn’t mess around)

So, you’ve landed your first job in the UK — whether it’s a part-time student gig, your first salaried role, or a freelance hustle. The payslip hits your inbox, and suddenly there’s a chunk missing. 🤯 That’s income tax, and trust us, it’s way less scary when you actually understand it.

Here’s a breakdown of UK Income Tax — explained in plain English, minus the financial jargon.

💸 What Is UK Income Tax?

Income Tax is the money the UK government takes from your earnings to fund public services like the NHS, education, roads, and more. It’s not just a random deduction — it’s your contribution to keeping the country running.

But don’t worry — you don’t pay tax on everything you earn.

🧾 What’s the Personal Allowance?

In the UK (2024–25), everyone gets a tax-free allowance called the Personal Allowance, which is currently £12,570 per year. That means you only start paying tax on income above that.

So if you earn:

• £12,000 a year → no income tax
• £20,000 a year → You pay tax only on £7,430 (20% of that)

📊 How Much Tax Will I Pay?

After your allowance, income is taxed in bands(as of 2024-2025):

Note: Most first-time earners stay in the basic rate band & the tax rate and slabs keep changing time to time.

🧑‍💻 PAYE: Pay As You Earn

If you’re employed, your income tax is usually taken automatically through the PAYE system. Your employer does the maths and HMRC gets paid before you even see the money. Easy.

Always check your tax code (usually something like 1257L) on your payslip. If it’s wrong, you might be paying too much (or too little 😬)

🧾 What If I’m Freelancing or Have a Side Hustle?

Then it’s on you to report your earnings. You’ll need to:

• Register with HMRC for Self Assessment
• File a tax return once a year
• Pay any tax owed by the deadline (usually 31 January)

Good news: You can claim expenses like laptops, subscriptions, and home office costs!

🎓 Students: Do You Still Pay Tax?

If you’re earning under £12,570 per year, you likely won’t pay income tax. But National Insurance might still apply if your monthly pay crosses the threshold.

If you accidentally paid tax but didn’t earn enough, don’t panic — you can claim it back from HMRC!

🧠 Too Lazy; Read This UK Income Tax:

• First £12,570 you earn? Tax-free
• Everything above that? Taxed in bands (usually 20%)
• If you’re employed → Tax is auto-deducted
• If you freelance → You must register and report it
• Students can often get tax refunds if overcharged

Adulting tip: Bookmark gov.uk/income-tax and check your tax code at least once a year.

Still confused? Ask your HR, a friend, or reach out to HMRC — they’re actually (surprisingly) helpful.

💰 Capital Gains Tax in the UK: What You Should Know Before Selling Property or Investments

by Soniya Basu | Apr 18, 2025 | Finance & Banking, Settling in the UK

(Because your profits shouldn’t surprise you with a tax bill later)

If you’re thinking of selling your crypto, cashing out stocks, or flipping your first investment property — pause for a second. There’s one thing you need to understand first: Capital Gains Tax (aka CGT). It’s one of those grown-up money things that can sneak up on you if you’re not prepared.

🧾 What Is Capital Gains Tax?

Capital Gains Tax (CGT) is a tax you pay on the profit (not the total amount) you make when you sell an asset that’s increased in value.

Let’s say you bought shares for £5,000 and sold them later for £10,000. Your gain is £5,000 — that’s the part that will be taxed.

Assets that CGT applies to include:

• 🏡 Property (not your main home)
• 📈 Stocks and shares
• 💰 Crypto (yes, including Bitcoin)
• 💼 Business assets
• 🎨 Valuables like art, jewelry, or antiques

💷 How Much Is the Capital Gains Tax?

Here’s how it breaks down (as of 2024–25):

• Basic rate taxpayers pay 10% on gains
• Higher rate taxpayers pay 20%
• BUT if you’re selling residential property, the rates are higher:
  • 18% (basic rate) and 28% (higher rate)

You only pay CGT on profits above the annual tax-free allowance, which is £3,000 (down from previous years).

🏡 Scottish Indian Selling Property? Here’s the Catch

If you’re selling a second home, buy-to-let, or an inherited property, you will likely owe CGT.

Good news:

• You don’t usually pay CGT on your main residence
• You might be eligible for Private Residence Relief if you lived in it for some time

Not so Good news:

• You must report and pay CGT within 60 days of the sale — or you could face penalties

📊 What About Crypto and Stocks?

Yes — selling crypto counts as a taxable gain if you’ve made profit. Same with stocks and shares, unless they’re held in a tax-free ISA.

💡 If you’re trading or flipping NFTs, crypto, or stocks as a side hustle, keep good records of your buys and sells — HMRC is watching!

🧠 Too Long; Read This:

• Capital Gains Tax = tax on profit when selling valuable stuff
• Applies to property, shares, crypto, art, and more
• You get a £3,000 tax-free allowance (per year)
• Residential property is taxed higher than other assets
• Report property sales within 60 days to HMRC
• Use ISAs or tax planning to keep more of your gains

✅ Final Tip:

If you’re not sure if you owe CGT or how to calculate your gain, speak to the HMRC support or a tax adviser — better safe than sorry! HMRC may also be able to provide an interpreter for you if you need to understand the information in a different language. So unhesitatingly ask if you need to!

🏥 National Insurance in the UK Explained: Why You Pay It and What You Get

by Soniya Basu | Apr 17, 2025 | Finance & Banking, Settling in the UK

(Because it’s not just another deduction — it’s your future safety net)

If you’ve recently started working in the UK, you’ve probably noticed “National Insurance” (NI) being deducted from your payslip. And if you’re anything like most first-time earners, your first reaction was: Wait — what even is that?!

No worries. Here’s your no-fluff, friendly guide to National Insurance: what it is, why you pay it, and how it actually benefits you.

💡 What Is National Insurance?

National Insurance (NI) is a type of mandatory contribution paid by employees, employers, and self-employed people in the UK. It helps fund important public benefits like:

• The NHS (National Health Service)
• Your State Pension
• Maternity allowance
• Unemployment support
• And even bereavement benefits

Think of it as your ticket into the UK’s social safety net — kind of like an insurance policy for life’s “what ifs.”

👀 Who Needs to Pay?

You’ll start paying National Insurance if:

• You’re 16 or older, and
• You earn more than £1,048/month (£12,570/year)

✅ It applies to both UK citizens and international students or migrants working part-time or full-time jobs.

💡 Heads up: You’ll need a National Insurance(NI) Number to start working legally. You can apply for one online via gov.uk.

📊 How Much Do You Pay?

For employees, National Insurance is calculated based on your earnings.

Example:
If you earn £2,000 a month, your NI contribution is around £90–£120/month depending on how much falls into each band.

If you’re self-employed, you’ll pay different classes (Class 2 & Class 4), usually through Self Assessment.

🧾 Where Does It Show Up?

NI gets automatically deducted from your payslip, just like income tax. You’ll usually see it listed as “NI” or “National Insurance Contribution.”

If you don’t see it and you’re earning over the threshold — ask your employer or check if your NI number is registered correctly.

🎁 What Do You Get in Return?

You’re not just throwing money into the void — you’re building your entitlement to:

• Free NHS care (including doctor visits, surgeries, A&E)
• State Pension when you retire (you usually need 10+ years of NI payments)
• Maternity/paternity benefits
• Jobseeker’s Allowance if you lose your job
• Employment and Support Allowance for long-term health conditions

The more qualifying years you have, the more benefits you can access later on.

🧠 Too Long;Read This:

• National Insurance = your contribution to public services and your future
• You pay it if you earn over £1,048/month
• It’s not the same as income tax
• It helps fund NHS, pensions, and safety-net benefits
• It shows up on your payslip automatically

Still unsure about your NI status or benefits? Check your contributions, qualifying years, and more at gov.uk/national-insurance.