You pay income tax on your taxable income. Normally, income from employment is taxable. There is more information about what employment income is taxable on the page What income is taxable? When you are an employee, your employer usually collects income tax from your wages via the PAYE system. Nearly everyone who lives in the UK is entitled to a tax free personal allowance.
This is the amount of taxable income you can receive each year without having to pay tax on it. There is more information about the personal allowance, and other allowances, in our tax basics section. When you are an employee and paid under PAYE, your personal allowance is spread equally over the tax year, rather than given to you all in one go or up front.
The way PAYE works means that you may have income tax deducted from your wages throughout the year, even if overall, you actually earn less than the personal allowance. You can usually get any PAYE overpaid throughout the year back, as a tax refund.
You can check these in our tax basics section. Be careful because the thresholds are different if you are a Scottish taxpayer. There is more information about the tax rates and how they apply to your earnings on our page What tax rates apply to me?
There is more information about NINOs in our tax basics section. The NIC you pay can earn you the right to receive certain state benefits, including the state retirement pension.
You can find out more information about NIC in our tax basics section. The page What National Insurance do I pay as an employee? You should always receive a payslip each time you are paid, this can be printed on paper, handwritten or an electronic copy for example. How often you get a payslip will depend on how often you are paid. It is usually weekly or monthly. Whatever payment method your employer adopts, they must always provide you with a payslip each payday.
If your employer does not give you a payslip each payday, you should ask for one. The payslip has to show a number of things, by law. The main ones are your gross wages the amount before anything is taken off , the income tax and NIC deducted under PAYE, any other fixed deductions from gross pay suitably itemised , the number of hours you worked if your pay varies depending on time worked and your net wages the amount you actually receive.
You can find more information on the ACAS website. You should also check carefully any deductions that have been made. As well as tax and NIC, you may see:.
If you are concerned that an unauthorised deduction has been made from your wages an unauthorised deduction can include not receiving any of the pay you were expecting at all , you should look at the ACAS website. Keep every payslip in a safe place — if you have paid too much tax, you may need the details to claim it back.
There is an example payslip and some help with understanding the typical deductions made, on the Understanding your payslip page in the resources section.
PAYE forms. When you start work for the first time, you will not have a form P45 , so your employer should ask you to complete a Starter Checklist this used to be known as form P Your employer will send the information that you give on the checklist to HMRC. HMRC will process the information you have provided on the Starter Checklist and where necessary, revise your emergency tax code to a proper tax code. You can find more about emergency tax on the page How do I check my coding notice?
It is important that you complete the Starter Checklist or provide the relevant information your employer has asked you for, as soon as possible before your first payday, so your employer knows what tax code to use. If you do not provide this information, you could end up paying way too much tax through having an 0T code operated.
It is also important that you complete the Starter Checklist correctly - one major cause of tax problems for those in employment, is the incorrect completion of the Starter Checklist — in particular picking the wrong employee statement A, B or C.
Do not send the checklist to HMRC. Keep a copy of the checklist for your own records. The checklist is available on GOV. There is an illustration of how to complete a Starter Checklist in the resources section. Form P60 is an annual summary of all your payslips. If you still work for your employer at the end of the tax year, they must give you a form P60 by 31 May. If you are working for an employer at 5 April , they must provide you with form P60 by 31 May Keep your form P60 as a record of your pay and the tax that was deducted.
You must keep your P60 safe. Form P45 is a record of your pay and tax deductions to date in the tax year. When you stop working for an employer, they should give you a form P It shows details like:. A form P45 has four parts. When you start a new job, give two parts Parts 2 and 3 to your new employer and keep the other one Part 1A for your own records. There is more information about form P45 on the page How do I check my coding notice?
You should keep your P45 safe as your employer will not be able to provide you with a duplicate if you lose it. This acts as a replacement for a P So, your employer may use the tax code generated by the Starter Checklist on an ongoing basis, or until HMRC have more information and issue a corrected tax code.
You may sometimes pay too much tax on your employment income through the PAYE system. For example, where you have paid emergency tax at the beginning of a new job or where you have tax deductible employment expenses.
You can find more information about why you might have paid too much tax and how to claim a refund of tax in our page What if I pay too much tax?
There are lots of organisations out there who will help you trigger your tax refund — for a fee. However, more often than not, it is straightforward for you to do things for yourself and avoid incurring fees unnecessarily. We provide information about what to consider before using a tax refund company to help submit your tax repayment claim in the tax basics section. Apprenticeships can offer a gateway into a variety of careers.
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Find out more about dividend tax and allowances - how money you earn from shares is taxed. If you, or your spouse or registered civil partner, are blind or have severely impaired sight, your personal tax allowance is increased. If you are both eligible, you'll each get the allowance. If you earn less than this threshold, you can transfer any unused blind person's allowance to your spouse or civil partner — this works in the same way as the marriage allowance.
If you live in England or Wales, you will need to be certified as blind and appear on a local authority register of blind people to claim this allowance.
If you have not been certified as blind and live in Scotland or Northern Ireland, you will qualify for the allowance if your eyesight is so bad that you are unable to perform any work where your eyesight is essential.
If your income is not enough to make use of the allowance, any unused balance can be transferred to your spouse or registered civil partner. This is known as the 'trading allowance'. This may be helpful if, for example, you rent out your garden for an event or let out a room for a week. Maintenance payments relief works in a similar way to the married couple's allowance. Financial Services Limited. Financial Services Limited is a wholly-owned subsidiary of Which? There are a range of income tax reliefs available that can reduce the amount of tax that you have to pay.
It is charged on your gross income before any pension contributions or PRSI. You cannot use tax credits or tax relief except for certain capital allowances to reduce the amount you must pay.
Find out more in our document on the Universal Social Charge. Some tax credits and reliefs will increase. Under the PAYE system, income tax is charged on all wages, fees, perks, profits or pensions and most types of interest. Tax is payable on earnings of all kinds that result from your employment including for example, bonuses, overtime, non-cash pay or 'benefit-in-kind' such as the use of company car, tips, Christmas boxes and so on.
Money you get which is not liable to income tax may be liable to other taxes. If you get gifts or inheritances, you may have to pay Capital Acquisitions Tax. If you sell assets such as property or shares you may have to pay Capital Gains Tax. Your credit certificate shows the rate of tax that applies to your income and the tax credits you are entitled to. At the start of the tax year, Revenue will automatically issue you a new tax credit certificate.
If your circumstances change during the year, Revenue will update your tax credit certificate and RPN. Your tax credit certificate and RPN instructs your employer whether to calculate the tax you owe using:. For most people, the cumulative basis of tax should be the normal position and makes sure your tax and USC liability is spread out evenly over the year.
Under the cumulative basis, your tax liability is calculated based on your total income from the start of the tax year. The tax which must be deducted each time you are paid the pay period is the cumulative tax due from 1 January to that date, reduced by the amount of tax already deducted in other pay periods. If a tax credit or standard rate cut off point or both are not used in full in a pay period, the unused amount can be carried forward and used in the next pay period within that tax year.
It means that the pay for each period is dealt with on its own, separate from previous weeks or months. Your employer will deduct income tax from your pay on a week-to-week basis. Your yearly tax credits and cut off points are not backdated to 1 January and do not accumulate for each pay period. This means you could be overpaying tax. You may be taxed on a temporary basis called emergency tax if you are changing job or starting work for the first time.
To avoid paying emergency tax you should register the details of the new job with Revenue's Jobs and Pensions online service in myAccount.
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