UK Tax System: A Doctor’s Definitive Guide
Tax doesn’t have to be taxing! In our latest blog, we’ll be taking a look at the UK tax system and how it affects medical professionals such as Doctors.
What is tax?
Tax is a financial charge or deduction from something you earn, own or an additional cost to something you buy.
Typically, governments collect taxes to fund public services that benefit society as a whole. The UK tax system helps to provide for services such as policing and law courts, and travel infrastructure like road and pathways. Taxes also fund British educational establishments and a comprehensive public healthcare system.
The UK has many different types of taxes; but the most common are known as ‘direct’ taxes, which are levied on the income or profits of the person, rather than on goods and services they may purchase.
The main type of tax in the UK is a ‘Direct’ tax called Income Tax, which you can see being deducted from your annual salary whenever you receive a payslip from your employer. If you don’t receive a payslip – perhaps because you’re self-employed, for example – you’ll need to pay it to HMRC directly, or at a later date. Other direct taxes include corporation tax, capital gains tax and inheritance tax.
‘Indirect taxes’ on the other hand are levied on goods and services; for example, VAT (or Value Added Tax, to give its’ full name) is a type of ‘consumption tax’ because it is charged on items that people buy.
In this blog post, we’ll explain who has to pay tax in the UK, UK Tax Rates, an overview of the UK tax system and what factors can impact your final take-home salary – as well as some monthly salary take-home examples.
Who has to pay taxes in the UK?
Approximately, 31 million people pay into the UK tax system.
Every person living in the UK needs to pay tax, regardless of their residency status. If you hold British citizenship, you’ll be taxed on your worldwide income, with allowances to prevent double taxation from certain countries. However, non-UK residents who are working and earning money in the UK will need to pay tax on income earned within the UK.
Personal Allowance (PA)
Most taxpayers are allowed a certain amount of tax-free income, called a personal allowance, of £12,500.
|Earnings (England, Wales and Northern Ireland)||Rate|
|Under your PA (£12,500)||No income tax payable|
|Over £12,500 up to £50,000||20%|
|Over £50,000 to £150,000||40%|
|Over £150,000 (additional rate)||45%|
Although please note, personal allowance drops by £1 for every £2 earned over £100,000.
Please click here for rates in Scotland.
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While your income tax rate is important, it will not be the only thing to affect your take-home pay. Most UK workers also have national insurance contributions deducted from their pay. National Insurance payments go towards funding of state pensions for when you retire and maternity pay.
|Earnings (Annually)||National Insurance Rate|
|Under £9,500||No national insurance payable|
|£9,500 to £50,000||12% on everything earned between £183 and £962 a week|
|Over £50,000||12% on everything earned between £183 and £962 a week, 2% on everything above that|
If you opt-in to the NHS Pension Scheme, then you’ll also have a monthly pension contribution taken from your pay before you receive your monthly salary. Pension scheme contributions are net of tax and therefore, the true cost of the contributions is lower than the gross rates.
To find out what the NHS Pension Scheme contribution rates are, click here.
Example Take Home Pay for a UK Doctor
|Grade||Annual Salary (Basic Pay)||Take-Home Pay After Tax|
|Specialist Training (ST1)||£37,935||£2,453|
|Specialist Training (ST8)||£48,075||£3,028|
|Specialty Doctors (end of the scale)||£74,661||£4,329|
|Consultant (middle of the scale)||£90,000||£5,070|
The above examples are after tax and National Insurance contributions, but not pension.
You should also note that the above examples from the UK tax system are taken from various salary scales and various salary scale points. Stay tuned for a blog post to explain the different UK salary pay scales and grades.
The NHS calculates a doctor’s salary based on their years of experience, qualifications and duties and responsibilities. To find out exactly where you will be placed on a salary scale, please contact us at email@example.com or ask your dedicated Recruitment Consultant.
If you’ve already been provided with a final annual salary, you can calculate your take-home pay after tax and national insurance here.
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