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A question we are often asked is: "I have earned more, and paid more tax this year, how come im getting less back than last year?"

The first answer is: The more you earn, the more tax you pay.

The second answer is: Class 4 National Insurance. This is charged at 9% of your net profits over about £8500, and again the more you earn, the more class 4 you need to pay.

Class 4 National Insurance is not deducted from your pay like your tax is, instead its deducted from your rebate. If your rebate does not cover what you owe you will get a bill.

Obviously as you earn more, your expenses will generally rise as well but there will come a point where you just have to pay more tax and National Insurance... unless you're Starbucks, Facebook or Google!

The people that get the biggest rebates are those that earn roughly £14k, they will likely receive a rebate of £2600 - £2400, where as some one earning £24K will likely receive £1600 - £1700. Would you rather earn £10k less to get £800 pound more on your rebate?

Here's the 2018-2019 and 2019-2020 Income Tax rates and bands. Its key to remember that these rates and bands apply to your net profit (after expenses).


Income Tax Rates 2018-2019 2019-2020
Basic rate -- The lowest level if income tax paid above the personal allowance 20% on earnings between £11,851 and £46,350 (you pay tax on £34,500) 20% on earnings between £12,501 and £50,000 (you pay tax on £37,500)
Higher rate -- The middle tier of income tax 40% on earnings between £46,351 and £150,000 40% on earnings between £50,001 and £150,000
Additional rate -- The top rate of income tax for high earners 45% on earnings above £150,000 45% on earnings above £150,000

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