I'd like to share some high-level details about taxation in England.
The tax system here is progressive. This means that it's levied at progressive rates: 20% on income from £0 to £37,700; 40% on income from £37,701 to £150,000; and 45% on income over £150,001.
However, there's also what's called a Personal Allowance (usually £12,570) – this is the amount of income you can earn without paying tax.
Furthermore, there's an interesting rule: the Personal Allowance starts to decrease by £1 for every £2 earned above £100,000. This means that your Personal Allowance will be £0 if your income is £125,140 or higher.

The tax is automatically paid by your employer, based on a tax code assigned to you by the tax authorities. The tax code is essentially derived from your expected annual income, and it's used to calculate your effective tax rate.

At the end of the year, if you've earned more than £100,000 (there are other conditions as well), you need to file a tax return, where you declare all your income. Based on the tax return, you may either receive a refund for overpaid tax or be required to pay additional tax.

Therefore, it's important to have the correct tax code to avoid unexpected payments at the end of the tax year.

As for me, when we arrived in England, I entered my estimated income on the tax authority's website. As a result, they assigned me a tax code that included the full Personal Allowance.
However, at the end of the tax year, it turned out that my employer had included all my relocation expenses in my income. This means that my tax code should have been different, with a reduced Personal Allowance. As a result, I now need to pay an additional £3,400 in taxes, which is not very pleasant...

What do you think of this system?

#life #work