Question

I earn £30,000 in 12 months. 20% is deducted for tax. What percent, x, is deducted for National Insurance if at the end of each month, I have £1,800 left?

a) 6%
b) 8%
c) 10%
d) 12%

Answer 1

To calculate the National Insurance deduction as a percentage of the student's income, first determine the total annual after-tax income, then subtract the actual annual income received. Finally, express the National Insurance amount as a percentage of the gross income. The answer is 8%.

Step-by-step explanation:

The student needs to calculate what percent of their annual income is deducted for National Insurance, given that 20% is deducted for taxes and that they are left with £1,800 at the end of each month. First, we calculate the annual net income:

£30,000 (annual gross income) - 20% (tax) = £30,000 - £6,000 = £24,000

The student has £1,800 left at the end of each month, so their monthly net income is:

£1,800 × 12 months = £21,600

To find the amount deducted for National Insurance, we subtract the annual net income after tax from the total net income the student receives:

£24,000 (after-tax income) - £21,600 (income received) = £2,400

We then calculate the percentage this deduction represents of the gross income:

(£2,400 / £30,000) × 100 = 8%

Therefore, 8% of the student's income is deducted for National Insurance, making option (b) the correct answer.