What's covered
Key facts
Gross pay vs net pay
Income tax and National Insurance are usually deducted from gross pay before net pay is calculated.
How VAT works
Most basic food items are zero-rated for VAT in the UK.
Income tax basics
The additional rate at the highest band applies to very high earners (over £125,140 in 2024/25).
National Insurance basics
Class 1 is the class of NI paid by most employees.
Wage vs salary
A bonus is a one-off extra payment for good performance.
Why tax exists - public services
Local councils collect council tax to help pay for local services.
Gross pay vs net pay
Gross pay is total pay before any deductions.
How VAT works
Shops collect VAT and pay it to HMRC each quarter through a VAT return.
Income tax basics
HMRC is the UK department that collects income tax from workers.
National Insurance basics
Employers also pay National Insurance contributions for each employee.
Sample questions
A taste of the 61 questions in this topic, answers marked. Sign up to practise the full set with spaced repetition.
What is net pay?
- •Pay before any income tax is taken
- •Pay including overtime and bonuses
- •Pay per hour before any deductions
- ✓Pay received after tax and deductions
What does 'VAT' stand for?
- ✓Value Added Tax
- •Value-Added Tariff
- •Variable Adjusted Tax
- •Verified Annual Tax
Why does the government collect income tax?
- •To fund company profits
- ✓To fund public services like the NHS
- •To lower prices in supermarkets
- •To pay the wages of private firms
Who pays National Insurance contributions?
- ✓Employees and the self-employed
- •Only businesses, not workers
- •Only people on the highest salaries
- •Only people over state pension age
Which is a typical feature of a salary?
- ✓Fixed annual amount paid monthly
- •Paid based on actual hours worked weekly
- •Paid only on days the office is open
- •Paid only when the worker is present
Which is a public service paid for by taxes?
- ✓Fire and rescue service
- •Mobile phone networks
- •Online clothes retailers
- •Private dental practices
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