What's covered
Key facts
Income tax and National Insurance are usually deducted from gross pay before net pay is calculated.
Most basic food items are zero-rated for VAT in the UK.
The additional rate at the highest band applies to very high earners (over £125,140 in 2024/25).
Class 1 is the class of NI paid by most employees.
A bonus is a one-off extra payment for good performance.
Local councils collect council tax to help pay for local services.
Gross pay is total pay before any deductions.
Shops collect VAT and pay it to HMRC each quarter through a VAT return.
HMRC is the UK department that collects income tax from workers.
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 received after tax and deductions
- •Pay set by the worker themselves
- •Pay used only to buy lunch at work
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 buy lottery tickets for HMRC staff
- ✓To fund public services like the NHS
- •To pay bonuses to all UK shoppers
- •To send free goods to every household
Who pays National Insurance contributions?
- ✓Employees and the self-employed
- •Only people aged sixteen years old
- •Only people without a UK passport
- •Only the Prime Minister and Cabinet
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 chocolate factories
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