It is important that visa holders are aware of the tax and benefits systems that will apply if they work in the UK. Below is a summary of how the UK’s income tax and National Insurance system work. Further details can be found here.
Income Tax and National Insurance contributions
You must pay tax on the money you earn from employment, and on certain benefits you may be entitled to at work. Your employer will make deductions from your wages and benefits for income tax and National Insurance contributions for you. These payments are collected by HM Revenue and Customs (the government body in the UK responsible for taxes) and they go towards general government spending and in particular, the UK’s National Health Service.
The amount of tax you pay each year depends on:
- how much of your income is above your personal allowance. This is the portion of your wages that is paid to you tax free. The level of the personal allowance is currently £12,500 per year, and
- how much you are paid. There are different tax rates that will apply depending on which tax bracket you fall in. If you earn over £12,500 but under £50,000 per year for example, the tax you will pay on your income after your personal allowance will be charged at a rate of 20%.
As a visa holder you are also entitled to claim certain benefits when working in the UK. These include statutory payments such as:
- statutory sick pay, which is a state payment of £95.85 per week (less tax) that you can claim for up to 28 weeks if you are too ill to work. The amount of statutory sick pay increases each year.
- statutory maternity, paternity, adoption and shared parental pay. These are state payments that you can claim if you take time off to look after a baby or adopted child. There are different amounts that you can claim depending on what type of payment you are claiming. If you take maternity leave for example, you can claim 90% of your average weekly earnings (before tax) for the first 6 weeks of your maternity leave, followed by £151.20 (less tax) for the next 33 weeks of your maternity leave. The fixed rate of £151.20 also increases each year.
Your employer may pay you more generous benefits as part of your employment.
Long term visa holders in the UK can also access the National Health Service, which gives them access to doctors and hospital treatment. However, since 2015 they must pay an Immigration Health Surcharge to access medical treatment. The amount of this surcharge is currently £400 per year
Author: Capital Law
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