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Wage taxes are taxes that we pay from our income, although it’s not a formal term in the accounting world.
In the UK, the wage taxes that we pay are Income Tax and National Insurance.
Income Tax is based on what we earn yearly. You have to pay it whether you’re employed or self-employed. The rate that you pay is based on the below table:
Take a look at the HMRC website if you want to keep up to date with Income Tax rates.
| Income | Tax rate | |
| Up to £12,570 | 0% | Personal allowance |
| £12,571 to £50,270 | 20% | Basic rate |
| £50,271 to £125,140 | 40% | Higher rate |
| over £125,141 | 45% | Additional rate |
There are five types of National Insurance payment:
Classes 1, 1A, 1B, 3 and 4 National Insurance. By paying them, we get access to state-provided benefits like the Job Seeker’s Allowance, the Marriage Allowance, the state pension and more.
If you’re self-employed, you have to pay Class 4 National Insurance. For those who are employed, you pay Class 1 National Insurance through PAYE (i.e. if you are salaried).
Take a look at the table below to see the different classes of National Insurance and how much you owe for each in the 2024/25 tax year:
| NI class | Who pays? | How? | How much is it? |
| Class 1 | Employees earning more than £12,570 | Your employer deducts it through PAYE | 8% (or 2% if you earn over £50,270) |
| Class 1A or 1B | Employers | Your employer pays it on top of your Class 1 | 13.8% |
| Class 2 | Self-employed people earning over £6,725 a year | Through a Self Assessment tax return | Flat £3.45 per week (scrapped from 6 April 2024) |
| Class 3 | Voluntary contributions – you can pay them to fill gaps in your NI record | Through a Direct Debit | £17.45 per week |
| Class 4 | Self-employed people earning over £12,570 a year | Through a Self Assessment tax return | 6% (or 2% if you earn over £50,270) – |
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