What does the Life in the UK handbook say about tax, National Insurance and driving?

What does the Life in the UK handbook say about tax, National Insurance and driving?

People in the UK pay income tax and National Insurance on what they earn. If you drive, you also need a licence, vehicle tax, insurance and sometimes an MOT test. These are mostly practical facts, so they are easier to learn with a plan.

What is income tax, and how is it paid?

Income tax is paid on money you receive, not only wages. That includes wages from a job, profits from self-employment, taxable benefits, pensions, and income from property, savings and dividends. The money pays for services such as roads, education, the police and the armed forces.

Most workers do not pay the tax themselves. An employer takes the right amount from each pay and sends it to HM Revenue & Customs, the government department that collects taxes. This system is called Pay As You Earn, or PAYE.

People who are self-employed pay their own tax through self-assessment. This means they fill in a tax return. Other people may need one too. If the tax office sends you a tax return, complete it and send it back as soon as you have the information you need.

What is National Insurance?

Almost everyone in paid work in the UK, including self-employed people, pays National Insurance Contributions. This money pays for state benefits and services, including the state retirement pension and the National Health Service.

Employers take the contributions from employees' pay. Self-employed people pay them directly.

Missing contributions has a cost. If you do not pay enough, you may lose some contributory benefits, such as Jobseeker's Allowance or a full state retirement pension. Part-time workers who earn too little may not qualify for payments such as maternity pay.

A way to keep the two apart is this. Income tax pays for general services and is collected through PAYE or self-assessment. National Insurance builds your right to certain benefits and to the pension.

What is a National Insurance number?

It is a personal account number. It makes sure the tax and contributions you pay are recorded against your name. Young people in the UK are sent one just before their 16th birthday.

People from other countries who live in the UK and look for work, start work or become self-employed need one. You can start work without one. If you have permission to work, you telephone the National Insurance number application line. You then receive a letter asking you to come to an interview at Jobcentre Plus. The letter says which papers to bring to prove who you are. Learn this version, because the test follows the handbook. Today this has changed: you can now apply online.

How old must you be to drive?

You must be at least 17 to drive a car or motorcycle, and at least 16 to ride a moped. You need a driving licence for public roads, and to get one you pass a test of both knowledge and practical skills. Large vehicles have other age rules and special tests.

A licence lasts until you are 70. After that it is valid for three years at a time. In Northern Ireland, a new driver shows an R plate, for restricted driver, for one year after passing.

A licence from another country can be used in the UK for up to 12 months. After that you need a UK full driving licence.

What else does a vehicle need?

Think of four items, each with its own purpose.

• Registration: if you live in the UK, your car or motorcycle must be registered with the Driver and Vehicle Licensing Agency, called the DVLA.
• Vehicle tax: you pay it every year, and it cannot be passed to the next owner when the vehicle is sold.
• SORN: if the vehicle is parked off the road and not in use, you must tell the DVLA with a Statutory Off Road Notification. This also does not transfer to a new owner.
• Insurance: you must have valid motor insurance. Driving without it is a serious criminal offence.

A vehicle more than three years old also needs an MOT test every year. Driving it without an MOT certificate is an offence.

People often mix up tax, insurance and the MOT. Write the three words on cards, with one fact on the back of each: tax is paid every year, insurance is a must for driving, and the MOT starts after three years.

When you feel ready, take the free practice test. The wider chapter on government, law and your role covers the rest of this topic. Related reading: courts and the law and elections and voting.

Check yourself

Can you say in your own words how an employee and a self-employed person pay income tax?

Can you list the ages that go with a car, a moped and a licence that changes to three years?

Can you name the four things a vehicle can need, and which one starts after three years?