Well done, you've got that job!
It could be your first job, a summer holiday job, or a Saturday job,
Whichever it is, it's great news.
Your first step into the world of work and some welcome cash.
There are lots of things to think about.
Have I got the right clothes?
The right equipment?
My best smile?
Will I need to pay tax?
What?
Seriously?
Tax?
YES!
Once you start work, there are lots of things you need to think about
And tax is definitely one of them.
Will I have to pay tax on everything?
NO!
You only pay tax when the amount you earn reaches a certain level.
So….
now that you have a job, you need to make sure that HM Revenue & Customs - often known
as HMRC - has the right information to calculate if you do need to pay tax.
This is really important, because the government uses this money to:
• save and improve people’s lives through the health service
• fight crime and defend our country • build schools and colleges, and pay your
teachers’ salaries • tackle poverty by paying benefits to people
who need them, and • support older people by paying them a
pension.
Okay…so what do you need to know about tax to get started?
Well, each tax year that's 6 April one year to 5 April the
following year (yeah, weird, we know) you're allowed to earn a certain amount of
money without having to pay tax.
This is called your Personal Allowance.
You can find out how much it is by doing a quick internet search for,
‘HMRC personal allowance’
When you start your new job – and before your first payday - your new boss might ask
you for some information, so they can tell HMRC that you’ve started work.
One of the things your employer will need to know is your National Insurance number,
which is sent to you automatically by HMRC, just before your 16th birthday.
And it stays with you throughout your life.
It's a unique number - you can think of it as your personal code.
It's important, because National Insurance contributions entitle you to certain benefits,
including (in a few decades’ time) your pension.
Your employer will automatically make National Insurance deductions from your salary or wages
once you’re 16 but, as with tax, this won’t happen until you’ve earned a certain amount.
You’ll also need your National Insurance number if, in the future, you apply for a
student loan.
But what if you can’t find your National Insurance number?
Don’t panic.
The GOV.UK website will tell you how to apply to HMRC to get another copy.
So, there you are in your new job waiting for your first pay slip.
When it comes, you should check it carefully as it will show you how much you’ve been
paid, and also what’s been deducted.
There’s lots of important information on a pay slip, so it’s worth taking a close look
to make sure you understand what everything means.
And it’s also probably worth keeping those payslips somewhere safe, in case you need
them later on.
It feels good, earning all that cash but how will you know if you are paying the right
amount of tax?
Well, let’s look at 3 situations you could find yourself in.
This is the technical bit so you’ll need to concentrate.
ATTENTION PLEASE!
Situation 1 - You’ve got an ongoing job - maybe it’s a Saturday job.
Soon after you start work, HMRC will send you a tax code.
This tax code says what your Personal Allowance is, so you know how much of what you earn
will be tax free.
Your employer will use your tax code to work out when you should start paying tax and how
much you need to pay.
And if you pay too much tax, your tax code will be used to make adjustments - so you
get the money back.
Situation 2 - You’ve got a temporary job – maybe something to give you a bit of extra
money during the summer holidays.
You might find that tax is being automatically deducted from your wages, even if you don’t
think you’re earning enough to pay tax.
Don’t worry.
When you finish your job, your employer will give you a form, called a P45, showing the
tax you’ve paid.
You can use this to contact HMRC to see if you’re due a refund – which could mean
that some or all of the tax is paid back to you.
Finally, situation 3 – You’ve have several different jobs during the year.
If that’s the case, at the end of the tax year – that magic date of 5 April again
– HMRC will automatically add up all your earnings, work out if you should have paid
tax and make any adjustments that are be needed.
If you’re ever worried you might have paid too much tax - or too little - you can always
download HMRC’s free tax calculator app,
for an estimate of how much tax you should have paid.
Or you can contact HMRC direct.
And one last thing, if HMRC needs to contact you – and that could be to let you know
about a tax refund – it’s important it has the right address.
Your employer won’t tell HMRC that you’ve moved – nor will anyone else -
you need to do that yourself!
So, this has probably given you a lot to think about.
We know your time is valuable and you’ve got lots of things to do that are even more
interesting than thinking about tax.
That’s why it’s important – and simpler for you - if you can get your tax affairs
right the first time.
It’s your money after all!
In fact, why don’t you go and find your National Insurance number today,
so you have it when you need it
And good luck with that job by the way We’re sure you’ll be great!