A beginner’s guide to the taxes you’ll hear about this election season

• If you’ve recently entered the workforce or the housing market, you may still be wrapping your mind around all of these terms.
• Here is what you need to know about the different types of taxes and how they affect you.
• When you earn money If you are an employee or own a business, taxes are deducted from your salary or profits you make.
• If you are self-employed, you will have to pay your taxes via an annual tax return assessment.

• The articles in this series explore the questions and bring answers as we navigate this turbulent period of life.
• The government collects taxes from all sources and sets its spending plans accordingly, borrowing to make up any difference between the two.

Income tax

• The amount of income tax you pay is determined by where your income sits in a series of “bands” set by the government.
• Almost everyone is entitled to a “personal allowance”, currently £12,570, which you can earn without needing to pay any income tax.
• You then pay 20% in tax on each pound of income you earn (across all sources) from £12,570-£50,270.

National insurance

• National insurance contributions (NICs) are a second “tax” you pay on your income – or to be precise, on your earned income (your salary).
• While Jeremy Hunt, the current chancellor of the exchequer, didn’t adjust income tax meaningfully in this year’s budget, he did announce a cut to NICs.
• This was a surprise to many, as we had already seen rates fall from 12% to 10% on incomes higher than £242/week in January.

Other taxes

• Wealth taxes may be in line for a change.
• In the budget, the chancellor reduced capital gains taxes on sales of assets such as second properties (from 28% to 24%).
• There are calls from many quarters though to look again at these types of taxes.

Andy Lymer and his colleagues at the Centre for Personal Financial Wellbeing at Aston University currently or have recently received funding for their research work from a variety of funding bodies including the UK's Money and Pension Service, the Aviva Foundation, Fair4All Finance, NEST Insight, the Gambling Commission, Vivid Housing and the ESRC, amongst others.