Next Steps 2 – Income

Money can't buy happiness...

But it can buy stuff and pay the rent!

As you move into independent living, you’ll be finding ways to pay the bills – either by working, being self-employed or receiving benefits if you need help.

This next step will help you understand more about how your income works and what tax is for.

Working Income

Minimum Wage

If you work for someone else in the UK (are “employed”) then you are entitled to a minimum amount of pay per hour – this is called the Minimum Wage, and is different depending on your age:

£8.20 £6.45 £4.55 £4.15

Living Wage

Another important type of wage is the Living Wage. This is suggested by the Living Wage Foundation and is NOT mandatory – workplaces choose if they want to pay this much, no one makes them.

At the moment, the rates for Living Wages are:

  • In London: £10.75.
  • Outside London: £9.30.

National Living Wage

Finally, the government have a National Living Wage. This is a minimum wage for over 25’s and is £8.72 an hour.

You should note that self employed people, prisoners, army staff and some farm workers are not entitled to the minimum wage. If you want to check, you can go to for more information.

If you work for someone, they are usually responsible for ensuring you are paying the right amount of tax and national insurance. You should still make sure this is correct – if it isn’t HMRC will be asking you to pay any shortfall, not your boss!

Self Employment

If you start your own business or work as a freelance contractor (like Uber, Deliveroo, Taskrabbit etc), you have to make sure you pay your own tax and national insurance (NI).

You’ll do this by making NI payments yourself directly to Her Majesty’s Revenue and Customs (HMRC) and by submitting a Tax Return every year so they can work out how much tax you owe. You also need to let HMRC know within three months of starting self employment of any kind.

Self employment can be great as its flexible and you only work when you want to. However, it can be irregular and the added responsibility of doing your own tax can put some people off.

You can check the website if you want more information about  self employment vs employment.

Income Tax

Whether you work for someone else, you start your own company or work as a self-employed contractor, you will be expected to pay tax; in this case it’s called Income Tax.

Here’s how it breaksdown:

  • Everyone starts with a tax free allowance – £12,500 a year for the Apr 20-Apr 21 tax year. This is money that’s yours and can’t be taxed.
  • Then, if you earn more than the allowance but less than £50,000 a year, you will pay 20% of the amount above £12,500.
  • If you earn more than £50,000 a year, anything you earn between £50,000 – £150,000 a year will be taxed at 40%.
  • There are other rules for those earning above £150,000.


If you are unable to work, the UK welfare system is designed to support you.

The rules can be complicated and the best bet to see if you can claim is to go to your local job centre or use a benefits checker online – you can find some in the list of websites in this section.

The most common benefits are:

Job Seekers Allowance – JSA

  • £58.90 if you’re aged 18-24.
  • £74.35 if you’re 25 or over.
  • £116.80 if you claim income-related JSA as a couple.

Employment Support Allowance – ESA

  • A single person aged under 25 – £58.90.
  • A single person 25 and over – £74.35 (for both contributory ESA and income-related ESA).
  • A couple aged 18 and over – £116.80 (income-related ESA only).

If after the Work Capability Assessment you are placed in the Support group, you will be awarded an additional component worth £39.20 a week.

Income Support – IS

  • Single, aged 16-24: £58.90.
  • Single, 25 or over: £74.35.
  • Single parent, 18 or over: £74.35.
  • Couples, one under 18, the other 18 to 24: £58.90.
  • Couples, one under 18, the other 25 or over: £74.35.
  • Couples, both 18 or over: £116.80.

If you have a terminal illness, you will automatically get the daily living enhanced rate. The mobility rate you get (if at all) will depend on the level of help you need with mobility.

The daily living rate is for the extra help you need with everyday tasks. This can include preparing food, washing, getting dressed or communicating with other people.

The mobility rate is for the extra help you need getting around. This can include moving, planning a journey or following a route.

Working / Child Tax Credit – WTC / CTC

The amount get depends on your circumstances – you should use a benefits calculator to work out if you might be entitled to this.

Universal Credit (UC)

MyBnk - Financial Education - Free Resources - DilemmaUC is the biggest change to the benefits system since it was created. The idea is to make the system easier by merging a number of benefits into one new benefit.

Three big changes:

  • Some benefits are being replaced by UC.
  • Payments will be made monthly, not fortnightly or weekly as most are at the moment.
  • Rent will be paid to you and you will be asked to pay it to your landlord yourself. (If you think you will struggle with this, you may be able to arrange for payments to go direct to your landlord).

If you claim Disability Living Allowance, it will become Personal Independent Payments. This will mean you need to go to an assessment to see how your condition affects your ability to work. This will determine what support you may be entitled to.

If you claim JSA, ESA, IS, HB, WTC or CTC, you will be moved to Universal Credit. The amount you receive will be based on what elements you are entitled to and will be different from person to person.

How much you get will depend on your earning. Your circumstances are assessed every month.

Standard Allowance

Your circumstances Monthly standard allowance
Single and under 25 £342.72
Single and 25 or over £409.89
In a couple and you’re both under 25 £488.59 (for you both)
In a couple and either of you are 25 or over £594.04 (for you both)

To work out how much you might be eligible for, use a benefits calculator – you can find links in the websites section.

At the moment, the rollout is happening slowly between now and 2023. If you currently claim benefits, you will be told when UC is available in your area. If you make a new benefits claim and the area you are in has UC, you will be put straight onto the UC system.

Useful Tools


  • Saros Research – Survey / focus group booking site which will pay you for your experience and opinions.
  • Prospects – This website allows you to find information about different jobs and careers to help you work out what you want to do when you graduate.
  • Career Test – Personality test which suggests what jobs you may enjoy.
  • Glass Door – See what other people think of employers before you apply for the job! Includes information on average wages, interview processes and also staff reviews of their workplace.
  • Listen to Taxman – Great website to check how much tax and NI you will pay when you start work. Basically a tax calculator.
  • Turn2Us – Benefits checker/calculator and grants finding website which also has useful info about benefits.
  • – Government information on all sorts of topics including benefits, housing, work rights and lots more. Also has access to a benefits calculator.


Taskrabbit (iOS / Android)

BeMyEye (iOS / Android)

MobEye (iOS / Android)

HMRC (iOS / Android)

Quidco (iOS / Android)

Airtime Rewards (iOS / Android)

Please contact to discuss any financial education needs for young people you may have.