Wages, Taxes and Other Deductions
Here, we provide details of legal minimum wages, taxes, national insurance contributions and pensions.
National minimum wage
Employers must pay a minimum wage by law. If you are aged 23 and over, this is referred to as the National Living Wage and is set to £10.42 per hour. See National Minimum Wage and National Living Wage rates – GOV.UK (www.gov.uk) for more information.
Some companies voluntarily choose to offer an increased wage to reflect the true cost of living. If you work in London, this is £11.95 an hour (the London Living Wage), and outside London, it is £10.90 an hour.
The tax year in the UK runs from 6th April 2022 to 5th April 2023 i.e. any calculations of how much tax you should pay in a year are linked to your earnings between these dates.
Everyone gets a personal allowance, which for most cases is set at £12570, i.e. if you earn below this amount, you should not need to pay tax.
Income received from benefits such as Universal Credit, Housing Benefit and Pension Credit is not counted as taxable income. Some tax is due on Child Benefit if you earn over £50000.
From £12571 to £50270, the tax rate is 20% (also known as the ‘basic rate’).
Anything earned between £50271 and £150000 is taxed at 40% (also known as the ‘higher rate’).
See https://www.gov.uk/income-tax-rates for more details, and how these rates vary for Scotland.
Income tax is paid to the Government department called HMRC (His Majesty’s Revenue and Customs). It is usually deducted at source i.e. if you are paid a salary, your employer automatically deducts tax using a tax code given to them by HMRC from your gross salary, before paying you your net salary. This system is called PAYE, or Pay As You Earn. (The other system of taxation is through ‘self-assessment’, where you declare your income to HMRC, and they tell you how much tax to pay; this would be the case if you were self-employed for example.)
See https://www.gov.uk/tax-codes for a description of tax codes. HMRC says that 1257L is the usual tax code for people with one job or a pension. If you change jobs, you should receive a form called a P45 from your old employer, which you give to your new employer, so that they can provide details to HMRC of your income to date, and ensure that you are on the right tax code.
Refer to our guide Self-Assessment Tax Return in order to check if you will need to complete a self-assessment tax return (for example, you earn over £50000 and are receiving Child Benefit, or are doing work in Ukraine).
National Insurance is a separate type of deductable contribution, in addition to income tax. National Insurance contributions are made while you are working and go towards your state pension and other benefits – it’s effectively an ‘insurance’ for when you are in a situation when you can’t work. It isn’t posible to opt out of this.
The amount you pay depends on how much you earn. Rates are given here: https://www.gov.uk/national-insurance/how-much-you-pay. Like income tax, it will usually be deducted at source by your employer before they pay you.
You can start work without your National Insurance Number, but you will need it eventually; you can easily apply for this online.
Workplace pensions and opting out
If you earn over a certain amount and meet certain other criteria, you and your employer are required to make a minimum contribution into a workplace pension scheme. These will be deducted from your payslip. The rates are typically a 3% contribution from your employer, and a 5% contribution from you. See https://www.gov.uk/workplace-pensions and in particular, https://www.gov.uk/workplace-pensions/what-you-your-employer-and-the-government-pay for more information.
As a refugee, if you are intending to return to Ukraine longer term, you may wish to tell your employer that you want to opt out of paying into your pension. You can do this at any time, but have this conversation as soon as you start work, as otherwise it may not be possible to access any money you have already put into your pension fund until you’re aged 55 or more. See https://www.gov.uk/workplace-pensions/if-you-want-to-leave-your-workplace-pension-scheme for more details.
Calculating your take home pay
‘Take home’ pay is what you actually receive once all deductions have been made from your gross salary.
You can use an online tax calculator to input your gross salary and pension contributions, and see what you should receive each month; one such example is: https://www.moneysavingexpert.com/tax-calculator/.
You can use such a calculator to check your payslip looks correct. Your payslip also shows your tax code.
What to do if your tax deductions don’t look right
If you have checked your tax code is correct, and you have checked your take home pay, and it doesn’t look correct, you may need to wait till the end of the tax year for HMRC to calculate the final tax position, and then send you a letter if they think there is a problem (either way). The letter will tell you how to get a refund, or how to pay the tax owed. See https://www.gov.uk/tax-overpayments-and-underpayments for more information.
After the end of the tax year, you should be able to use this HMRC online calculator to see if you have paid too much tax. You can wait for the HMRC letter, or you can ask for the refund using a form P50, but only if the conditions listed are met. Note that we have not personally tried this process.
HMRC tax refunds
HMRC will contact you by a P800 letter between June and November following the end of the tax year (5th April) if they have calculated that they owe you money. You can claim your refund by following the instructions in the letter. See https://www.gov.uk/tax-overpayments-and-underpayments/if-youre-due-a-refund for details of the process.
You may be able to claim your refund online, which will involve creating a Personal Tax Account, and getting the money transferred to your bank account. In order to create a Personal Tax Account, you will need to create what is known as a ‘Government Gateway ID’. Your identity will need to be verified and for this, HMRC provide a number of options, as described on their website.
If you don’t have UK forms of identification such as a UK passport or driving licence, don’t worry. You can use the details on a payslip from the last 3 months to verify your identity, or a P60 form received from your employer. When you use these methods, HMRC will ask you a series of questions that only YOU should know the answer to, such as:
- Approximately when you last opened a UK bank account
- The amount of tax or National Insurance you paid on your payslip
Enter these details as accurately as possible. What HMRC is doing in the background is comparing information it already has or can access about you (such as your credit file) with the information you enter. If they match, HMRC can say that it really is you and your identity is considered ‘verified’.
You can then provide your bank account details, and you should receive the refund owed within a few days into your account. If you do not claim your refund online within 3 weeks, then HMRC will send a cheque to your address within 6 weeks.
Alternatively, if your letter says you will get a cheque (and does not invite you to claim online), you should get a cheque within 2 weeks.
You should be able to use your bank’s online banking app to photograph and upload the cheque as a way of paying it into your bank account.
It is possible that your Universal Credit income will be affected by receiving the tax refund (as Universal Credit gets details of your income from HMRC an adjusts how much it pays as a result).
If you have already returned to Ukraine, and want to check if HMRC have sent you a tax refund letter or cheque to your UK address, you can contact HMRC.
What to do if you are returning to Ukraine
If you are returning to Ukraine permanently, you should follow the process described here to inform HMRC: https://www.gov.uk/tax-right-retire-abroad-return-to-uk.
You will either fill in a P85 form, or if you are registered for self-assessment, you can let HMRC know through the self-assessment form SA109. HMRC advises: “All individuals leaving the UK permanently or working abroad for at least one full tax year should complete a form P85. This allows HMRC to check a customers’ tax records and notify them whether a tax refund is due or not.”
If you have already returned to Ukraine, and believe you may be owed a tax refund, you can contact HMRC.
How to contact HMRC
If you need to contact HMRC, the various methods of contact are available here: Income Tax: general enquiries – GOV.UK (www.gov.uk). You may find it easier to use a webchat – at first you will be speaking with a chatbot, but you can ask to speak to an agent.
There is a link on this page to getting further support from HMRC if needed: Get help from HMRC if you need extra support: Help you can get – GOV.UK (www.gov.uk). HMRC offer an interpretation service if a customer is not able to speak English and there is nobody in the household aged 16 or over that can interpret for them.