money and work work index training/youth credits | job seekers allowance
Money is an important matter when you leave school. Whether you get a job or you are on a training scheme, money - or sometimes lack of it - is a major topic of conversation.
How much is well paid? When you get your first pay packet or pay cheque it may seem like a fortune but then you start to notice all the bits and pieces that are taken away - tax, NI (National Insurance), pension fund, etc.
You begin to wonder 'What do different jobs pay?' 'Does my friend pay the same tax as me?' 'Why do I pay tax?' This page covers some of these questions and tells you where you can find the answers.
The days of cash in a wage packet are almost gone. Most people are paid by cheque or their wage is paid directly into their bank. You may have a choice.
Some employers pay their staff weekly; others pay their staff monthly. It's worth asking when you get a job, so you can budget before you receive your first pay packet.
If you have no other means of support, there are 'bridging loans' available for young people to help you through the first few weeks until you are paid. The Benefits Office or an Employment Service Adviser at the Job Centre can tell you if you are entitled to help.
Income Tax is a tax paid to the government. Everyone who earns money, in whatever form, has to pay income tax to pay for services such as the police, the government, or hospitals. The amount you pay depends on how much you earn. A few people do not earn enough to pay tax.
Tax is automatically deducted from your wage unless you are self-employed. Self-employed people still pay the same tax but they send it direct to the tax office.
How much do you pay?
Everyone has a tax-free amount. This is the amount you are allowed to earn in a year before you start paying tax. Your tax-free amount is worked out using your 'Personal Allowance'. The government sets Personal Allowances. They can change when the government announces its budget.
Example 1
| Your Personal Allowance is | £4195 |
| Allowance Restrictions | £0 |
| Your Tax-free amount for the year is | £4195 |
This means you can earn about £80 per week before you start paying tax.
Example 2
| Your Personal Allowance is | £4195 |
| Additional Allowances (for union fees) | £100 |
| Allowance Restrictions | £25 |
| Your Tax-free amount for the year is | £4270 |
This means you can earn about £82 per week before you start paying tax
At the moment in the UK, the tax rate is 25%. This mean you pay 25p tax for every £1 you earn above your Tax-free amount.
Example 3
| Your Tax-free amount is | £4195 |
| You earn | £5200 |
| You pay tax on | £1,005 |
This works out at just under £5 per week.
The Inland Revenue works out how much tax you pay. It is important that you let them have any details they need so this is done properly.
P60, P45 and Tax Code
Every April you will receive a P60 form. This shows how much tax you have paid during the year. You should also receive a PAYE Coding Notice. This tells you your Personal Allowance, tax-free amount and tax code for the coming year. If you leave a job during the year, your employer gives you a P45 form showing how much tax you have paid during the year. You need to give this form to your new employer.
For more information about the Inland Revenue and Tax contact your local Tax Office or see Resources.
National Insurance is a fund of money that is used for everyone's benefit. It is used to pay for certain benefits such as Jobseeker's Allowance or maternity benefit. It is automatically taken from your wage.
Everyone pays it but the amount you pay depends on how much you earn. National Insurance contributions can vary in the same way as tax depending on the government's budget.
Just before your sixteenth birthday you should receive a card from the DHSS. It's a card showing your National Insurance Number. You need to quote this number on many documents so keep it safe.
For more information about National Insurance, contact your local DHSS or see Resources.
It may seem a long way off and a funny thing to have to think about when you have just started work, but many companies have a pension scheme for their workers. This means that you pay a regular amount of money from your wage to the scheme. The amount you pay depends on the company's scheme.
In return the company will pay you a pension or give you credits towards a pension for when you retire.
Youth Credits or Training Credits give you the chance to choose and buy some locally approved training when you leave school. They are given to all 16 and 17 year old school/college leavers and may be available for some 18 year-olds.
The credits have a monetary value. The amount may varies according to the training you need. Credits can only be used to buy training with a local employer or training agency. The training you buy leads to NVQ level 2 qualifications or above. You can get more information about Training Credits from your local Careers Office or from your local TEC (in England) or LEC (in Scotland) (See Resources/ work/ organisations).
If you are 18 or over and unemployed, you may be entitled to a Job Seekers Allowance. 16/17 year olds are not entitled to claim benefits as unemployed people as they are guaranteed a Youth Training place. There are however exceptions to this rule.
For more information you should contact:
- The Job Centre if you are 18+
- The Careers Office if you are 16/17.
- Jobseeker's Allowance: Helping you back to work
- Jobseeker's Allowance: Information for 16- and17-year olds.