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Managing my money for young adults
Managing my money for young adults

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Session 2: Earning money, understanding tax

Introduction

To start, watch the following video in which Bobby Seagull introduces Session 2, where you investigate earning your own money and paying tax.

Download this video clip.Video player: mmmft_1_video_week2_intro.mp4
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Transcript

BOBBY SEAGULL:
Like it or not, understanding tax is a crucial skill that you will need throughout your life. After all, you want to keep as much as you can from what you earn, don't you? Getting your head around tax as early as possible makes good sense.
This session covers what you need to understand as you start to earn money, whether it's from part-time or holiday work – things like the deductions that can be made from your hard-earned wages, income tax and National Insurance Contributions, and how to claim back tax if you've paid more than you needed to. If you're already in a job, do you know the tax code you're on? And how can you check it's the right one?
What does the government do with the tax revenue raised? Well, a large proportion of government spending is in a range of state benefits, so in this session you'll also look at the benefits you may be entitled to once you finish your education.
So enjoy. The knowledge gained this session will help you right now, and for many years ahead.
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As you start to earn an income from part-time or holiday work you’ll want to understand why some of what you earn can be deducted in the form of Income Tax and National Insurance Contributions (NICs). What are these, when do you have to pay them and how do you claim back tax if you’ve paid more than you should?

What does the government do with the Income Tax and National Insurance that it raises? As you’ll learn here, a substantial proportion of government spending is on benefits for various groups within the population. Might you be eligible for any benefits?

By the end of this week, you should be able to:

  • know about the minimum wage and the other employment rights to which you are entitled
  • identify the pros and cons of zero-hour contracts
  • understand Income Tax and National Insurance Contributions, and how these are deducted from earnings
  • understand Income Tax codes and when to make Income Tax returns
  • understand the basics of state benefits, their funding and how means testing works.