What does PAYE mean?
PAYE (pay as you earn) refers to the tax deductions on your salary before you receive it. It is the way the majority of employees pay their income tax, and it is sent from your employer direct to HRMC. Deductions for your national insurance contributions and student loan payments are also made this way.
Your PAYE explained
Your rate of tax is calculated based on your salary. You may pay your tax at 20%, 40%, or 45%.
• Basic-rate is 20% on income of £11,851-£46,350 or £12,501-£50,000
• Higher-rate is 40% on income of £46,351-£150,000 or £50,001-£150,000
• Additional-rate is 45% on income of £150,001+
Your wage slip should show the following information:
• Company of employment & employment number
• Your name & UTR (unique taxpayer reference)
• Department (management, sales, administration)
• Payment method (BACs)
• Payment period (weekly or monthly)
• Basic pay (overtime, if any)
• Basic rate & national insurance deductions
What does a PAYE payslip look like?
PAYE and your Pension
Paye is a way to collect tax on a pension income. The provider collects the tax (this is normally a pension scheme or annuity), and they forward it direct to HM Revenue & Customs, they also deduct the tax you owe on a state pension. If you stay in employment while you receive a pension, you will pay tax on both your earnings and the pension. If a state pension is your only income, or you have another source of income, you must declare it yourself and file a self-assessment tax return.
Self-employment and PAYE
Self-employed workers will need to file a self-assessment income tax form. They need to be done once every financial year, plus make 2 ‘payment on account’ deposits to HM Revenue and Customs in January and July. You can pay your self-assessment through the PAYE system if your tax bill is less than £3,000 or if you already pay through PAYE, this could be because you are employed by a company as well as making an income through self-employment.
Self-assessment tax returns should be filed by October 31st if they are paper copies, online tax returns should be submitted by January 31st.
What Can I Claim Tax Back On?
You can claim tax back on most work-related expenses. Below is a list of items that you can request a tax rebate on:
• Vehicles for work use
• Fuel/Mileage costs
• Travel expenses
• Overnight expenses (food in certain circumstances)
• Rail Tickets (single & season tickets)
• Uniforms, work clothing, and tools
• Cleaning costs for uniforms
• Professional fees, subscriptions & unions fees
This list is an example of what you could claim back; there may be expenses & items specific to the job role that you could claim back.
What are the Deadlines?
- Current legislation in the UK says you can go back up to four Tax years when claiming a Tax rebate. This means at the current moment in time you can make a claim for the following periods:
- Year ended 5th April 2021
- Year ended 5th April 2022
- Year ended 5th April 2023
- Year ended 5th April 2024
Effectively this means you can claim Tax relief from 6th April 2020.
Over such a long period of time wage slips and p60s can be lost or misplaced. This isn’t a problem as you have lots of ways to obtain this information.
- Contact your current/previous employers as they are legally obliged to keep your records going back 6 years and because of GDPR if your request that information they have to provide it to you.
- You could log into your government gateway which is easy to set up if you have never done this.
- Contact HMRC on 0300 200 3300 and request that they post out to you a tax history letter which usually arrives in 10 working days from when you request it from them and this tax history letter will go back 4 years.
Am I Due Any Tax Back?
Most workers, whether employed or self-employed may be due a tax rebate for work-related items, expenses or because they have paid too much tax. HMRC do not know everyone’s individual circumstances, and it is up to the taxpayer to contact HMRC to see if they are entitled to any tax relief.
Other reasons for a tax refund may include pension payments, redundancy payments, interest from a savings account, PPI, or UK income if you are living aboard.
All claims for tax refunds and rebates are reviewed on a case by case basis. Use our tax claim form and answer a few simple questions to see if you could be entitled to make a claim.
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