Unit 1 Topic 12 Flashcards
Define ‘gross interest’
Interest paid without tax deducted.
What’s the National living wage?
The minimum that people aged 23 and over must be paid per hour by law. The national minimum wage applies to workers aged under 23.
What’s the National minimum wage?
The minimum pay per hour to which workers are entitled by law. The rate depends on a worker’s age and whether they are an apprentice. It applies to workers aged under 23. Workers aged 23 and over are entitled to the national living wage.
What’s a P45?
A document legally required from an employer when an employee stops working for them. It summaries the employee’s tax and National Insurance details for their next employer.
What’s a P60?
A document prepared at the end of every tax year to show all the income tax and National Insurance contributions paid by an individual during the preceding 12 months.
What’s self-assessment?
A method used, often by self-employed people, to calculate the amount of tax and National Insurance they need to pay.
Define ‘self-employment’
Earning an income by selling your goods or services directly to a consumer, rather than being employed by somebody else and being paid a wage or salary.
What is taxable income?
Income on which tax must be paid- that is, after deducting allowance and any permitted expenses from the total income earned.
What’s a tax band?
A category of income on which a specific rate of tax is payable.
What’s a tax code?
A code used by a person’s employer or pension provider to calculate the tax to deduct from pay or pension.
What’s tax paid at source?
Tax deducted by the provider (on behalf of the government) from interest earned on savings. From April 2016, providers no longer deduct income tax from savings interest at source.
What’s a tax return?
A tax form completed by people in certain situations. It sets out details of income and expenditure and allows the taxpayers or HMRC to calculate the amount of tax and NI contributes owed.
What’s a zero-hour contract?
A type of employment contract that doesn’t set out a fixed number of hours than an employee must work and be paid for. The employer is not obliged to provide work nor the employee to take work offered.
What are income tax and national insurance contributions used by the government for?
To pay for essential services such as the NHS, education, police and defence.
NI in particular is used to pay for benefits that working people will use themselves, such as the state pension and for benefits for others such as the unemployed.
What act introduced National Minimum wage?
The National Minimum Wage Act (1998)
What did this act establish?
The low pay comission which advises the government what the NMW and NLW should be every year.
What’s the national minimum wage for people aged 25 and over?
£10.42
What is the maximum number of hours per week an employee can work over 17 weeks?
48 hours
If an employee works 5 days a week, they’re entitled to at least 5.6 weeks paid holiday per year. True or false?
True
Working regulations don’t apply to everyone - name some examples
The armed forces
Emergency services
Domestic workers in private households (eg nannies)
When 24 hour staffing is required
What would be found in an employee’s contract of employment?
The main terms of someone’s employment eg their pay and working hours
Who sets out the amount of income tax and national insurance people pay every year?
Chancellor of the Budget
Name the income tax rates
Basic rate - 20%
Higher rate - 40%
Additional rate - 45%
Name 2 requirements to have to pay national insurance
Being aged between 16 and the state pension age
Being an employee earning more than a specified amount per week
Who is an employee’s income tax and NI contributions payed by?
Their employers direct to HMRC through the Pay As You Earn (PAYE) scheme. The employer pays the employee net of these payments.
Name 3 documents involved in the employment rights act 1996
Payslips
P45
P60
What does a payslip show?
Shows earnings before and after deductions, explains deductions and shows how the wage is paid.
Name 2 ways employers can provide payslips
On paper
Electronically
Name 4 things a P45 shows
An employee’s tax code and PAYE reference number
An employee’s National Insurance number
An employee’s leaving date
An employee’s earnings in the tax year so far
Why do employers use P60s?
To prove how much they have earned and how much income tax and NI contributions have been deducted from their salary.
What guidance does the HMRC provide?
Guidance with completing tax returns
Name the 3 deadlines for when HMRC must receive a tax return and the money people earn
Paper tax returns must be recieved by midnight on the following 31st October
Online tax returns must be recieved by midnight on the following 31st January
Final payment of tax due must be received by midnight on 31st January
What does the HMRC calculate?
The tax owed on a tax return
How long should you keep your tax return records for?
At least 22 months
