How much tax do you pay on the minimum wage?
The UK’s National Minimum Wage (NMW) and National Living Wage (NLW) are designed to ensure fair pay, but how much of that pay ends up in your pocket after tax? This article breaks down the tax and National Insurance (NI) deductions for full-time workers (40 hours per week) in both England and Scotland, based on 2024–2025 rates. We’ll explore the different wage categories, explain how tax works in both regions, and offer tips on maximising your take-home pay.
National Minimum and Living Wage Rates
As of April 2024, the hourly rates for minimum wage workers across the UK are as follows:
| Category | Hourly Rate |
|---|---|
| Apprentice | £6.09 |
| Under 18 | £7.49 |
| 18-20 years | £8.79 |
| 21-22 years | £10.18 |
| 23 and over (NLW) | £11.44 |
These rates apply across the UK, including Scotland, and they represent the legal minimum wage you must be paid for your age group or apprentice status.
Tax and National Insurance Contributions (NI)
Tax deductions vary depending on where you live, but the primary deductions come from Income Tax and National Insurance. In the 2024-2025 tax year:
- Income Tax (England, Wales, and Northern Ireland):
- - Personal Allowance: £12,570 (no tax)
- Basic Rate: 20% on earnings above £12,570 up to £50,270
Understanding UK Income Tax Brackets: A Comprehensive Guide for 2024
- Income Tax (Scotland):
- - Personal Allowance: £12,570 (no tax)
- Starter Rate: 19% (£12,571 to £14,732)
- Basic Rate: 20% (£14,733 to £25,688)
- Intermediate Rate: 21% (£25,689 to £43,662)
How does Income Tax work in Scotland?
- National Insurance (NI):
- - 12% on earnings between £12,570 and £50,270.
To understand how these deductions affect minimum wage workers, let’s calculate the annual income and deductions for full-time employees, assuming 40 hours per week and 52 weeks a year.
Tax and NI Breakdown (England, Wales, Northern Ireland)
Let’s see how much Income Tax and National Insurance a worker in these regions would pay based on the 2024-2025 rates:
Checking pay - National Minimum Wage - Check if you are getting minimum wage
| Category | Income Tax | NI Contributions | Total Deductions | Net Income |
|---|---|---|---|---|
| Apprentice | £19.44 | £11.66 | £31.10 | £12,636.10 |
| Under 18 | £601.84 | £361.10 | £962.94 | £14,616.26 |
| 18-20 years | £1,142.64 | £685.58 | £1,828.22 | £16,454.98 |
| 21-22 years | £1,720.88 | £1,032.53 | £2,753.41 | £18,420.99 |
| 23 and over (NLW) | £2,245.04 | £1,347.02 | £3,592.06 | £20,203.14 |
For workers in England, Wales, and Northern Ireland, the first £12,570 of earnings is tax-free due to the Personal Allowance. This is especially beneficial for workers on lower wage rates, like apprentices and younger employees.
Tax and NI Breakdown (Scotland)
In Scotland, tax is calculated differently because of the additional Starter and Intermediate rates. Here’s the breakdown based on Scottish tax bands:
A Guide to Tax-Free Savings for UK Higher Rate Taxpayers
| Category | Income Tax | NI Contributions | Total Deductions | Net Income |
|---|---|---|---|---|
| Apprentice | £18.44 | £11.66 | £30.10 | £12,637.10 |
| Under 18 | £590.76 | £361.10 | £951.86 | £14,627.34 |
| 18-20 years | £1,133.83 | £685.58 | £1,819.41 | £16,463.79 |
| 21-22 years | £1,709.69 | £1,032.53 | £2,742.22 | £18,432.18 |
| 23 and over (NLW) | £2,228.49 | £1,347.02 | £3,575.51 | £20,219.69 |
Due to the different tax bands in Scotland, workers in the lower wage categories will pay slightly more tax than their counterparts in the rest of the UK, though the overall impact remains small for those earning minimum wage.
Real-World Example: National Living Wage (23+)
If you're 23 or older and earning the National Living Wage of £11.44 per hour, your gross annual income is £23,795.20. Here’s how much you would take home after tax and NI deductions:
- England, Wales, NI: Total deductions of £3,592.06, leaving you with £20,203.14 net income.
- Scotland: Total deductions of £3,575.51, leaving you with £20,219.69 net income.
How This Impacts Younger Workers
For younger workers, the effect of tax and NI deductions is less noticeable, as their lower wages keep them closer to the Personal Allowance threshold. For instance, a 19-year-old earning £8.79 per hour would have a gross annual income of £18,283.20. After paying £1,828.22 in tax and NI in England, they would take home £16,454.98.
Maximising Your Take-Home Pay
If you’re earning the minimum wage, there are ways to maximise your income by exploring government allowances and benefits:
- Marriage Allowance: If you’re earning below the Personal Allowance, you can transfer up to £1,260 of your unused allowance to your spouse, potentially reducing their tax bill by up to £252.
- Universal Credit and Other Benefits: Workers on low wages may also qualify for Universal Credit, which can help top up your income based on factors like your household and living situation.
By combining tax reliefs and making the most of available benefits, you can boost your take-home pay and improve your financial situation.
Tax Planning for Minimum Wage Earners
Understanding your tax deductions is key to financial planning, especially when earning minimum wage. Whether you’re an apprentice, a young worker, or over 23 earning the NLW, staying informed about your tax obligations can help you budget more effectively. While Scottish workers pay slightly more tax due to additional tax bands, the difference remains modest for low-income earners.
By exploring allowances and government benefits, you can make sure you’re keeping as much of your hard-earned money as possible.
