The end of tax year, 5th April 2021 marks the time that you need to work on your tax return. To avoid penalties, it is important that you understand PAYE Tax and UK self assessment tax and other related information, including UK Tax Returns and PAYE Tax Returns that will give you extra money to spend. Filing a PAYE tax return with us is also one way to determine if you paid more than or not enough tax. You never know, you might be owed some tax back and with our service, there’s no charge if you’re not owed a refund. Find out how to claim a PAYE tax refund in this helpful guide.
How does the PAYE Tax Return scheme work in the UK?
How PAYE works – The basics
Tax on employee income is deducted by means of the PAYE scheme, a system for collecting tax that is used in the UK. It involves three parties—you, your employer, and HMRC.
How to calculate a tax code
HMRC will calculate a tax code for you and forward the information to your employer.
Based on your PAYE or tax code, tax from your taxable income is directly deducted by your employer from your pay. It is your employer who will work out how much tax will be deducted from your weekly or monthly pay.
For instance, if your tax code is 1250L, the last 3 digits will be multiplied by 10 to determine how much you’re allowed to earn before tax is paid. This means you can earn £12,500 tax-free. Anything you earn above this amount will be taxable at various rates.
Whenever appropriate, National Insurance contributions will also be deducted on top of the PAYE Tax.
For each time you are paid, your employer will give you a payslip.
Your payslip must contain:
- Your gross income—wages before any deductions are made
- Individual or total amount of fixed deductions like trade union subscriptions
- Individual amount of tax deductions and any other variable deductions
- Your net income—the total amount after deductions
- Amount of any part-payment wage and the method of payment, such as cash payment credited to a bank account
Your payslip may or may not contain your tax code, National Insurance number, pay rate, and additional payments.
In the event that your tax code does not appear on your payslip, ask your employer or HMRC about it. This way you will know if the right amount of tax is deducted from your pay and whether or not you can claim tax back.
PAYE Tax Return, who doesn’t need a payslip?
Even if you are working for a company or business in the UK, your employer is not obliged to provide you with a payslip if:
- You work as a contractor, freelancer, or a worker but not necessarily an employee
- You are in the police service or work as a merchant seaman
- You are a share fishing master or crew member
When is the UK tax year end?
At the end of tax year 2020-12 or the year before that (2019-20), you should receive a form P60, the ‘end of year certificate’ or its equivalent by 31 May. As long as you’re employed on 5th of April, you should receive the form at the specified date because employers are required to give the form to all employees on their payroll.
The form P60 will show your pay, tax deducted, and the final tax code operated. The same information will be forwarded to HMRC by the employer.
Calculating a refund or tax owed
You can check how much income tax you paid the previous tax year and determine if you qualify for tax returns. Anyone who overpaid tax is eligible for a rebate under UK tax return rules.
Check our UK Tax refund calculator
Better yet, consult with experts on tax refund for help with claim tax back and/or more information about tax returns UK laws. You may also wish to complete a UK Self Assessment tax return online.