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libf unit 1 > Topic 12 - Earnings > Flashcards

Topic 12 - Earnings Flashcards

1
Q

who pays income tax or national insurance?

A

people who earn money from being employed or self employed

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2
Q

what happens with taxes or NI?

A

goes to the govt to spend on health pensions or benefits etc

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3
Q

definition of national minimum wage?

A

lowest hourly wage an employee can be paid

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4
Q

what is the minimum wage for those 23 years and older?

A

£10.42 known as the living wage

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5
Q

what is the maximum working hours

A

48 hours per week over 17 weeks

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6
Q

what is the most common weekly working hours?

A

38 and 40 hour a week

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7
Q

where does the maximum minimum wage not apply?

A

where 24hr staffing is require
- members of the armed forces
- emergency services
- domestic working in private households, like nannie’s

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8
Q

what are the 3 conditions regarding holidays and breaks?

A
  • an employee who works 5 days a week is entitled to 5.6 weeks paid holiday
  • employees are entitled to 1 day off per week
  • if the working day is 6 hours employees are entitled to a break of 20 minutes rest
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9
Q

how does income tax work? (3)

A
  • paid on earned and unearned income
  • according to how much individual income is
  • personal allowance of £12.5k is tax free
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10
Q

what are the 4 income tax bands called?

A
  • personal allowance
  • basic rate
  • higher rate
  • additional rate
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11
Q

What is the taxable income and tax rate of personal allowance?

A

up to £12,570
0%

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12
Q

What is the taxable income and tax rate of basic rate?

A

£12,571 to £50,270
20%

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13
Q

What is the taxable income and tax rate of higher rate?

A

£50,271 to £150,000
40%

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14
Q

What is the taxable income and tax rate of additional rate?

A

over £150,000
45%

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15
Q

What is a personal savings allowance?

A

Basic tax rate payers have £1,000 before they must pay income tax

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16
Q

What does NI stand for?

A

National Insurance

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17
Q

When must you pay NI contributions?

A
  • between 16 years old and the state pension age
  • earning more than a specified amount each year
18
Q

When do you receive your NI number?

A

The months before turning 16

19
Q

What does the number of years which you have been paying NI effect?

A

Entitlement to certain state benefits.

20
Q

What does PAYE stand for?

A

Pay as you earn

21
Q

How do employees pay income tax and ni contributions?

A

Their employer directly to HMRC

22
Q

What system do self employed people use pay income tax and NI?

A

Self assesment.

23
Q

What does ‘self-assesment consist of?

A

Completing income tax forms called tax returns

24
Q

What are the 3 main 3 different documents?

A
  • a payslip
  • a P60
  • a P45
25
Q

When is a payslip produced?

A

Every time someone is paid

26
Q

What is on a payslip?

A
  • earning before and after deductions
  • explain deductions
  • how the wage is paid
27
Q

How are payslips provided?

A

Paper or electronically

28
Q

How does an employer work out how much tax to deduct from an employees earnings?

A

Tax code

29
Q

What is the format for tax codes?

A

3 or 4 numbers and 1 letter.

30
Q

What is a P 45?

A

A document prepared when an employee leaves an employer, summarising an employees tax and NI details

31
Q

Where does a P45 go when someone does leaves a job without a new job to go to?

A

The job centre plus to calculate the benefits they’re entitled too

32
Q

Where does a P45 go when someone has 2 jobs and leaves 1?

A

The second employer, who must calculate the new information

33
Q

What does a P45 show? (5)

A

The employees
- tax code and PAYE
- NI number
- leaving date
- Earnings in the tax year so far
- income tax paid in the year so far.

34
Q

Where do the 4 parts of a P45 go?

A
  • old employer sends part 1 to HMRC
  • employee keeps part 1A for their records
  • employee gives 2 and 3 to their new employer or job centre plus
35
Q

When does an employer issue a P60?

A

At the end of every tax year.
- on the 5th of April

36
Q

What is on a P60?

A

Summary of the tax paid by the employer for the tax year that has just ended

37
Q

When may an employee need to use their P60? (4)

A
  • completing self assesment tax returns
  • claim back overpaid income tax or NI contributions
  • apply for tax credits
  • apply for a loan or a mortgage
38
Q

How are tax returns now done?

A

Online

39
Q

When is the paper tax return deadline?

A

Midnight on 31st October

40
Q

When is the online tax return deadline?

A

Midnight on the 31st January

41
Q

What are the penalties for missing the deadline for completing and submitting the tax return?

A
  • 1 day - 3 months: £100
  • 6 - 12 months: £300 or 5% of the tax due, whichever is higher
  • 12 months+ : up to 100% of the tax and £1k
42
Q

How long should you keep your documents for?

A

22 months

libf unit 1 (13 decks)

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