Hello, my name is Miss Wyatt, and I am so pleased that you could join us here today for our citizenship lesson.

Welcome to today's lesson on how much of our pay goes to the government, from the unit, "What has the UK economy got to do with me?" By the end of today's lesson, you will be able to explain what information can be found on a payslip, and how much of our pay goes to the government.

We'll be using the following keywords in today's lesson, and some of these new words may be new to you today, but please don't worry, as I am here to guide you.

Our first key word is tax.

Tax are the charges imposed by the government on citizens and corporations to finance some of its spending.

We then have income tax.

Income tax is a compulsory tax on earnings from employment collected by the government, to fund public services.

And National Insurance, or NI for short, are contributions paid from money earned to enable individuals to qualify for certain benefits and the state pension.

So, like I said, some of these words may be new to us today, but please don't worry, as we will be using them a lot.

Our lesson on how much of our pay goes to the government is broken up into two parts today.

The first part we're going to explore what information is found on a payslip, so looking at a payslip.

And then, secondly, how is tax from your pay calculated? So, when you are ready, let's start the first part of our lesson today.

When we get paid for a job, we don't always get to keep the full amount we earned.

Now, I wonder if you already knew that before, or you've heard parents and guardians say you don't always get to keep all your money that you earn.

Well, this is because a portion of our earnings gets deducted, or taken, and given to the government.

The amount of government deductions is shown to us on our payslip, and this is given to us by our employer when we are paid.

So, we can see how much we have had taken from our earnings and what has been given to the government.

The deductions are made clear on payslips, so all employees, which are workers, know why they receive the amount they are paid.

A payslip provides a breakdown of earnings and other important details, including deductions, so things that are taken; the final monthly income, so what you will actually be paid, what money you will receive in your bank; and income is the money you get, and expenditure is the money you spend.

Deductions are the amounts taken out.

So, income is the money that you get; expenditure is the money that we spend on everyday life, bills, food, everything like that; and deductions are the amounts taken out of our income.

So, the statements below are all incorrect.

So, our job is to identify the one mistake in each statement and correct it.

So, we have three statements.

I'll read them out to you, and hopefully you'll be able to hear already what is wrong with these statements.

So, the first one says, "The deductions on your payslip show how much money the government have given." Then we have, "The employee is responsible for giving the payslip every month." And then, finally, "Two important pieces of information on a payslip are your deductions and your final monthly expenditure." So, there are things wrong with these statements; we need to work out what they are, and we need to correct them.

So, pause the video and have a go at this task.

Okay, it's time for our answers.

So, hopefully we've managed to correct our statements and find the mistakes.

So, the first one, we should have spotted that the word we needed to change was to "taken".

So, it should say, "The deductions on your payslip show how much money the government have taken", not "given".

Then we had, "The employer" rather than "The employee" is responsible for giving the payslip every month.

And then, "Two important pieces of information on a payslip are your deductions and your final monthly income." So, income was the word we were looking for there.

If you managed to identify those mistakes and correct them, well done you.

Good job.

All payslips are slightly different according to the workplace policies, because they all include some standard information.

Most jobs pay monthly, but some pay weekly.

They may pay after you have completed the work and not in advance.

Payday is usually the same day every month or week, but it changes according to weekends and bank holiday dates.

You should be paid earlier, so this doesn't disadvantage you.

It is the employer's responsibility to manage your pay, but they may hire external private companies or accountants to do this on their behalf.

So, let's have a look at a typical payslip then.

So, here we can see a typical payslip, okay? So let's go over it in a bit more detail.

So, information on a payslip includes who you work for.

So, they will name the employer.

They will state what your pay is before deductions, so anything that comes is being taken out.

It will state the money taken from your pay by the government, so your income tax and your National Insurance, and it will say money taken for other things.

So, you might have pension, you might have a student loan.

Now, the employee, your name will be there.

The date that you will be paid will be there.

Your total deductions, so after everything that has been added up, this is what your total deductions are.

And then, we have your net pay, so this is the amount you will receive in pay.

So, after all of the deductions and the money being taken for certain things, this is what you're going to take home, either every week or every month for instance.

And then, on there, it will show the hours or the amount of time that you have worked.

Two of the deductions on a payslip show us how much of our pay goes directly to the government.

And these are income tax and our National Insurance, or NI for short.

This is not money that you will ever see, or money that you will need to pay yourself separately, because it's already taken off your payslip.

It comes directly out of your pay before you even get it.

Just before your 16th birthday, you should get sent a national-insurance number by the government, which you give to your employer when you get a job.

So, this will be happening soon for some of you.

When you start work, you are given a tax code, and then the government works out the tax deductions on your behalf, so they do it for you.

So, let's have a go at checking our understanding.

Match the time to the event.

So, we have different times and we have different events on the right-hand side of our screen.

So, the different times are before your 16th birthday, when you get a job, and after your first week or month.

And then, we have receive your tax code, receive your first payslip, and receive your National Insurance number.

When do we receive these things? So, let's pause the video and have a go at matching the time to the event.

Okay, time for answers now.

So, before your 16th birthday, you should receive your National Insurance number.

Well done if you got that right.

When you get a job, you will receive your tax code from the government.

And then, after your first week or month of work, you will receive your first payslip.

So, well done if we managed to match these correctly up to the time and the event.

Income tax.

So, this is deducted from your pay by the government to pay for essential services such as the NHS, education, the defence and security within the country, police and fire services, transport, infrastructure, welfare and benefits, and government departments.

So, this is already taken from your pay by the government before you receive your total net pay.

National Insurance.

So, both employees and employers pay National Insurance contributions, or NICs for short.

And self-employed workers also contribute.

So, the National Insurance that is taken funds things like your state pensions.

So, a UK state pension is a regular payment from the government that most people can claim when they reach the state pension age, and it's based on their National Insurance contributions.

So, it's a form of social security designed to provide regular income in retirement.

It also funds the NHS, along with income tax.

It funds unemployment benefits.

It funds maternity and paternity pay.

It funds sick pay in benefits, and disability benefits.

A pension is a long-term savings plan that provides you with an income after you retire, so when you stop working.

It is usually funded by contributions from you, your employer, and sometimes the government.

So, you may know of some people that are living in their pension and having to live off their pension, or you might have never have heard of it before.

But in short, it's a long-term savings plan that will give you that income after you retire, so when you've finished work and you're ready to retire, that's how you get your money.

It is deducted from your pay on your payslip to ensure you are gradually saving for retirement and will have enough money for goods and services when you are no longer working.

A student loan.

So, many students will need a student loan while at university to pay for tuition fees, accommodation, food, and services.

These work differently than other loans because you only have to start paying it back when you earn enough money.

So, we saw on our payslip example that there was a small part of student loan, so that will always be taken, as well, if you do have a student loan before you receive your net pay.

The money you pay is dependent on your income.

So, it will be calculated on your behalf and it will come directly from your pay when you are able to pay it back.

So, identify two examples of what income tax and National Insurance fund.

Can you remember from our list? So, what two things did income tax and National Insurance fund? Can you remember? Pause the video and have a good think about this task.

Okay, it's time to share our answers.

So, two examples of what income tax and National Insurance fund.

So, income tax; we've got education, we've got defence and security for example, and we also have National Insurance; so our state pensions, welfare benefits.

But there's so much else that you could have named.

So, if you haven't got these two exact examples down, please don't worry, as long as you got something from our list that we discussed earlier in the lesson, that is great.

Now, for this task, we're gonna have a go at labelling the payslip and to explain in one sentence what it shows.

So, we have A, B, C, D, and E labels that we need to have a go and remember what it was showing.

What does it show on our payslip? So, A, I want you to tell me what income is.

B, what's income tax? C, what's National Insurance? D, what does it mean by deductions? And E, what is net pay? So, let's have a go at this task, labelling the payslip.

Pause the video when you're ready to have a go at this task.

Good luck.

Okay, well done everyone.

So, your sentences may look similar to ours.

So, A was showing our income, which is the money you would get paid before deductions.

B shows our income tax, which is deducted by the government to pay for essential services like education.

C; this shows your National Insurance, which is deducted by the government to help fund benefits such as the NHS and state pensions.

We then had D, which shows our deductions, which is the total amount you have had deducted from your pay, so what's been taken out.

And E; this shows your net pay, which is the final amount you receive after all of your deductions, so what you actually take home, they call it.

So, well done if we managed to label this payslip correctly.

We have now explored what information is found on a payslip, and we've looked at what a payslip is.

We're now going to look at how is tax from your pay calculated? So, income tax is taken from a person's wage if they earn over a certain amount.

The personal allowance in March, 2025, was 12,570 pounds, so anything you earn under this amount is not taxed.

In the UK, the more someone earns, the more tax they pay.

This system is as progressive taxation.

This means that those with higher incomes contribute more to public services, so the more you earn, the more you get taxed.

People with lower incomes may pay less income tax.

For example, someone earning 12,500 pounds annually would pay zero pounds in income tax, while someone earning 30,000 a year would pay around 3,486 pounds in income tax.

As of March, 2025, people in the UK are all given a personal allowance of 12,570 pounds, below which they do not pay any tax.

After this, it is progressive.

So, just to show you now, some income tax and bonds.

So, if we're receiving the personal allowance of 12,570 pounds, which all people in the UK are now given, you will pay 0% tax rate on it.

The basic rate of income tax is between 12,571 pounds to 50,270 pounds.

If that's what you are earning, you will pay around 20% tax of what you have earned.

If you're on the higher rate, which is earning 50,271 pounds to 125,140 pounds, you could be taxed up to 40%.

And then, additional rate is anything over 125,041 pounds.

The tax rate is 45%.

So, this is just to show you that, if we're earning any of these things between taxable income, this is what the tax rate will be set at.

So, this is known as progressive tax.

Anyone earning over 50,271 pounds only pays 40% income tax on income above that threshold, so not on their entire earnings.

They will pay a higher rate.

For example, Ashwin earns 60,000 pounds a year, and this means he will pay 0% tax on any earnings up to 12,570 pounds because this is the personal allowance.

The taxable income then for Ashwin is 47,430 pounds.

The income tax will be at 20%, which will be 7,540 pounds.

The income tax at 40% is 3,888 pounds and 40 pence.

Therefore, Ashwin will pay 11,428 pounds and 40 pence of income tax in total, because he is earning 60,000 pounds a year.

This does not take into account, however, his other deductions; this is just income tax only.

So, let's check our understanding on this.

So, in the UK, the more someone earns, the more tax they pay.

What is this system called? Is it regressive taxation? Is it aggregated taxation, progressive taxation, or universal taxation? Which one was it: A, B, C, or D? What can we remember? Hopefully we remembered that it is called C, progressive taxation.

The more you earn, the more tax you will pay in the UK.

National Insurance is paid by the majority of employees and employees.

Employees need to pay National Insurance contributions to qualify for benefits like the state pension, unemployment support and sick pay, making sure they have financial help if and when they need it.

NICs in the UK are calculate based on your earnings and your employment status.

The amount you pay depends on whether you're employed or self-employed, and how much you earn.

The rates of National Insurance change more often than income tax and are dependent on a number of factors, including salary.

For many people, the rates for the 2024/25 tax year are earnings up to 123 pounds to 242 pounds per week is 0%; so you won't pay any National Insurance contributions.

Earnings between 242 pounds and one pence, to 967 pounds a week, expected 8% for that tax year.

Earnings over 967 pounds a week, it will work out at 2%.

So, this means National Insurance is regressive taxation.

So the more you earn over the personal allowance, the less you pay.

Now, this is the opposite of income tax, which you might have noticed, which is obviously progressive taxation; we've just learned that.

So, National Insurance is regressive taxation.

So, National Insurance rates change more often than income tax, and they're dependent on a lot of things, like your salary.

National Insurance and income tax are both calculated based on earnings.

National Insurance will be deducted first.

National Insurance is calculated on earnings above 12,570 pounds, like we've said.

Income tax is then calculated on the remaining taxable income after the personal allowance and National Insurance have been taken out.

So, let's study this image.

Based on the image, let's have a go at answering these two questions.

So, why is National Insurance important to pay, and what do you think this image is representing? Based on what you've just learned, why is National Insurance important to pay, and what do you think this image is representing? So, pause the video, and have a go at answering these two questions.

Okay.

Why is National Insurance important to pay then? Hopefully you've written something like, "National Insurance is important to pay as it allows us to qualify for benefits like the state pension, unemployment support, and sick pay and makes sure we have financial help if and when we need it.

Number two: what does the image represent? Maybe we've said something like, "The image is an umbrella representing National Insurance, protecting workers from risks and giving them the help that they need." So, people are all sheltered under this umbrella because they're being protected from the rain, or from any other dangers like National Insurance can help protect.

In the October, 2024 budget, Chancellor Rachel Reeves announced significant changes to NICs affecting employers and National Insurance contributions.

Employer NIC rate was increased.

So, the rate of employer NICs was increased from 13.

8% to 15%, and it comes into effect from April, 2025.

Lowered earnings threshold.

So, the threshold at which employers start paying NICs on employee earnings was reduced from 9,100 pounds to 5,000 pounds per year.

Employment Allowance adjustment.

So, the Employment Allowance, which reduces the NIC's bill for eligible employers, was increased from 5,000 pounds to 10,500 pounds, and the 100,000 pounds eligibility cap removal, so allowing more businesses to benefit from this.

So, these were some of the changes that Rachel Reeves said in the October, 2024 budget.

For example, Pedro is an employer.

He read the budget on the government website and is now worried that he has to pay more money to the government in NICs.

Pedro says, "I'm worried that I'll have to get rid of staff, as I won't make enough money to pay them, but I did read the government removed the 100,000 pounds eligibility cap.

So, I might now qualify for certain tax benefits or support schemes that were previously limited to people earning below this threshold, so I might benefit after all." These 2024 Budget measures aim to raise additional revenue for public services, but raised concerns among businesses about increased operational costs and potential impacts on employment.

The chancellor replied to the people who were worried about the changes in National Insurance by saying that the government had to balance the budget and stabilise both inflation and the economy as a whole.

This was just one of the things that the government has to do in order to balance the budget and economy.

So, let's have a go filling in the missing words here.

So, it says, "In October, 2024," blank, "the chancellor changed," blank, "contributions, NICs.

The employer contribution was," blank, "and the earnings threshold was" blank.

Can we have a go at filling these gaps? Pause the video and have a go.

Okay, hopefully we've had enough time now to fill in these gaps of our sentences, so let's go through it together.

"In October, 2024 Budget, the Chancellor changed National Insurance contributions.

The employer contribution was increased, and the earning threshold was lowered." So, we had "budget", "National Insurance", "increased", and "lowered".

They were are missing words.

Well done if you got all of those right.

For this task, Izzy has explained how tax for your pay is calculated, but she's incorrect.

We need to change what she has said so that she is correct.

So, Izzy says "Income tax is taken out of your pay first and is 10% of all your pay.

Then National Insurance is taken out.

This is 5% of your pay.

So, in total 15% is given to the local government from your pay." So, she is incorrect here.

Can we have a go at trying to change what she has said to make it correct? So, pause the video and have a go at helping correct Izzy.

Okay, so we've changed what Izzy has said so that she is correct.

So, hopefully we should have said something like, "National Insurance is taken out of your pay first and is 8%.

Then income tax is taken out.

This is 20% of your pay on the average UK salary.

These are given to the national government automatically from your pay." So, she got a few things wrong, didn't she? So, she said the income tax is taken out first, but actually, no, National Insurance is.

Then she said income tax is 10%, but it's not.

Income tax is around 20% of your pay.

Then she said National Insurance is taken out, which we know it comes out first, and she said it's 5% of your pay.

It's not, it's 8%.

Then she said these are given to a local government.

Well, no, these are given to the national government, automatically from your pay.

So, well done if we manage to correct Izzy's mistakes.

We've now come to the end of our lesson on how much of our pay goes to the government.

So, I'm gonna summarise it for us.

A payslip shows key details about your earnings, including net pay and deductions, like National Insurance and income tax.

NICs are deducted first, and in 2025, are based on earnings above 12,570 pounds, with employees paying 8% up to 50,270 pounds, and 2% on anything above that.

Income tax is then calculated on earnings above the personal allowance of 12,570 pounds, with 20% tax up to 50,270 pounds; 40% on income over 50,270 pounds; and 45% for income over 121,140 pounds.

Both National Insurance and income tax are deducted from your salary automatically before you receive your net pay.

These contributions help in essential services like NHS, State Pensions, and public benefits.

So, thank you for your contributions in this lesson and all of your efforts.

I hope you've enjoyed it as much as I have and have learned lots about our pay, our payslips, and how much goes to the government.