Tax & National Insurance Contribution
Your tax-free Personal Allowance
The standard Personal Allowance is £12,500, which is the amount of income you do not have to pay tax on.
Income Tax rates and bands
The table shows the tax rates you pay in each band if you have a standard Personal Allowance of £12,500.
| Band | Taxable income | Tax rate |
| Personal Allowance | Up to £12,500 | 0% |
| Basic rate | £12,501 to £50,000 | 20% |
| Higher rate | £50,001 to £150,000 | 40% |
| Additional rate | over £150,000 | 45% |
National Insurance
An employee’s Class 1 National Insurance is made up of contributions:
- deducted from their pay (employee’s National Insurance)
- paid by their employer (employer’s National Insurance)
The amounts deducted and paid depend on:
- the employee’s National Insurance category letter
- how much of the employee’s earnings falls within each band
Employee National Insurance rates
This table shows how much employers deduct from employees’ pay for the 2020 to 2021 tax year.
| Category letter | £120 to £183 (£520 to £792 a month) | £183.01 to £962 (£792.01 to £4,167 a month) | Over £962 a week (£4,167 a month) |
| A | 0% | 12% | 2% |
| B | 0% | 5.85% | 2% |
| C | N/A | N/A | N/A |
| H | 0% | 12% | 2% |
| J | 0% | 2% | 2% |
| M | 0% | 12% | 2% |
| Z | 0% | 2% | 2% |
Example If you’re in category A and you earn £1,000 in a week you’ll pay:
- nothing on the first £183
- 12% (£93.48) on your earnings between £183.01 and £962
- 2% (£0.76) on the remaining earnings above £962
This means your National Insurance payment will be £94.24 for the week.
Employer National Insurance rates
This table shows how much employers pay towards employees’ National Insurance for the 2020 to 2021 tax year.
| Category letter | £120 to £169 (£520 to £732 a month) | £169.01 to £962 (732.01 to £4,167 a month) | Over £962 a week (£4,167 a month) |
| A | 0% | 13.8% | 13.8% |
| B | 0% | 13.8% | 13.8% |
| C | 0% | 13.8% | 13.8% |
| H | 0% | 0% | 13.8% |
| J | 0% | 13.8% | 13.8% |
| M | 0% | 0% | 13.8% |
| Z | 0% | 0% | 13.8% |