It is important to pay the correct amount of PAYE tax. If you do not, by the end of the tax year you may owe HM Revenue and Customs (HMRC) money or be due a refund. Below you will find about the how much PAYE should I pay?
You can use this guidance to check that you are paying the right amount of PAYE tax. Use the tax code calculator to work out your code and check your payslips if you receive them.
Your employer will have sent your details to HMRC. You will have been given a tax code which tells your employer:
- how much income you can have before paying tax (your personal allowance)
- the rate of tax they should collect from your pay
PAYE stands for Pay As You Earn and refers to the tax deducted from your pay each month by your employer.
Everyone in the UK is entitled to earn up to a certain amount of money before they start paying income tax. This is known as the Personal Allowance and it’s currently set at £11,850 a year.
Your employer will deduct income tax from your pay based on how much you earn and how many allowances you claim.
Most workers are entitled to one allowance but you may be able to claim more if, for example, you’re over 65 or have a disability.
Your employer will deduct National Insurance Contributions (NICs) from your pay if you’re classed as an employee, rather than self-employed.
Your PAYE tax bill is calculated using the information in your P60 and P45, plus what you’ve told your employer about your income, benefits and expenses.
Some of this information is supplied to HMRC by your employer, but it’s still worth checking that everything is correct and up-to-date. If it isn’t, you might be paying more tax than you should.
The most common reasons for paying the wrong amount of tax are:
- Being on the wrong tax code
- Not having told your employer about a change in circumstances (such as a second job or a pay rise)
- Having given incorrect information to HMRC
- Having received an overpayment from HM Revenue & Customs (HMRC) which they’ve now recovered through PAYE
The best way to check whether you’re paying too much tax through the PAYE system is to use our calculator. It will automatically pick up any personal allowances you may be entitled to.
You are an employee. You work for your employer and they will deduct PAYE (pay as you earn) tax from your salary or wages before paying you.