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What Your Taxes Pay For

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There are just over 30 million taxpayers in the UK at the moment – that’s around 46% out of the total population of the UK. While that may look like over half of the population are avoiding paying tax, that definitely isn’t the case. Children, OAPs and the unemployed don’t have to pay tax, of course. But where does your tax go? What does your tax pay for? How are the government spending it? What do you get out of it?

Income tax

Most employed people pay income tax if they earn over £11,000 per year. So you’re probably wondering where it all your hard earned cash goes! It can be split into 12 categories:

As you can see, there’s a lot that needs to be paid for! The government also gets money from other taxes such as beer and cider duties, betting, gaming and lottery taxes, tobacco tax, VAT on goods and services, stamp duty, alcohol duties, vehicle excise duties and a few more.

National Insurance

As part of government deductions, you’re also paying National Insurance (NI) if you earn over £155 per week. It currently stands at 2% of your weekly earnings that go over £827 or 12% of your weekly earnings if you earn between £155 and £827. This goes towards state services and benefits including:

NI contributions are designed to benefit everyone. Even if you’re in employment and under the State Pension age, there’s a chance you’ll rely on NI contributions at some point in your life whether it’s a trip to A&E, an unexpected redundancy or a sudden accident that leaves you sick or disabled.

Breakdown of where your taxes go

Income tax goes towards a number of different sectors in society. Last year the expenditure included:

Overseas Aid

We’ve put this in the spotlight because it’s a bit of a controversial topic. You might have heard some people say ‘Why are the government spending so much of our taxes on foreign aid instead of on people in the UK?’ At just shy of 1.2% of the total expenditure, it’s actually a much smaller amount than you think and it’s used very wisely! Some of the things overseas aid covers include:

For example, if you earn £20,000 per year, you’ll pay £3,445 in taxes. That means you pay £31 a year in overseas aid. That’s 43 vaccines, 60 days of HIV treatment and 5 mosquito bed nets – that’s a lot of people you just saved!

Where does my council tax go?

Seen as one of the biggest household bills, apart from rent or mortgage payments, council tax is used for all sorts of local services. It usually accounts for around 25% of your local council’s income and, with exception of students and under 18s, everyone has to pay it. It goes towards a lot of important things including:

As you can see, council tax covers so many services and facilities in your area. But if you disagree with the way it’s spent, you can formally complain to the Local Government Ombudsman.

We know taxes always seem to be in the news – especially when it comes to where your money is going. The amount for each sector changes every year. When the chancellor of the Exchequer announces the annual Budget he or she also announces the proposed expenditure for all of the above-mentioned things.

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