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how much do I have to pay?

How much you pay depends on your income and there are very strict and sometimes quite complex rules about it. In very simple terms, everyone can earn a certain amount of money without paying any tax (your ‘Personal Allowance’). You will then pay 0%, 20% or 40% on the rest of your income. The rates of tax vary every year – the Chancellor of the Exchequer sets the rates at his Budget. As an example, the following rates apply to employed workers in the 2008/09 tax year.

item rate
Personal Allowance £6035
Next £0 0%
Next £34800 20%
Above £34800 40%
Thus, if you have a wage of, say £17500, you will pay tax as follows:
item rate tax payable
Personal Allowance £6035 £0
Next £0 0% £0
Next £34800 20% £2293
Above £34800 40% £0
Total payable   £2293
Don’t forget you will also have to pay National Insurance contributions on any income, so your earnings will be reduced once again (see section on National Insurance).
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