You pay Income Tax in different ways - depending on your income and your employment status. These ways include PAYE (Pay As You Earn), Self Assessment, tax deducted 'at source' and one off payments.
On this page:
If you're an employee your employer will deduct Income Tax from your wages throughout the year - using the tax code HM Revenue & Customs (HMRC) provides to them - and send the deductions back to HMRC. If you get a pension, your pension provider will deduct tax in the same way. This system of collecting Income Tax is known as Pay As You Earn - usually shortened to PAYE.
If your circumstances change and you are given a new tax code, HMRC will send you a 'PAYE Coding Notice'. This tells you what your tax code is and how HMRC has worked out the tax-free income you can receive. Keep all PAYE coding notices in case you've got any questions or need to check you're paying the right amount of tax.
If you want HMRC to check your tax code you can ask them to send you a P810 Tax Review form. When you get it you'll need to fill it in and send it back as soon as you can. If you prefer you can call the number on the form and give the information over the phone. You can tell HMRC about other income you've received or about changes that may reduce your tax bill. If the information you give shows that you're paying the wrong amount of tax, HMRC can change your tax code straight away to correct this.
If you have complex tax affairs you may also have to complete a Self Assessment tax return - read the section 'If you've got complex tax affairs'.
If you've got other income in addition to your wages and/or pension read the section 'How to pay tax on extra income'.
If you're self-employed you'll need to register for Self Assessment and complete a Self Assessment tax return. You can complete and file your return online or fill in a paper form. You'll probably need to pay any Income Tax you owe for a tax year in two instalments plus a final 'balancing payment'.
Filling in your tax return online is easy and quick - and you can do it at any time of the day or night. Online tax returns are processed faster than paper returns which means that if HMRC owes you any money you'll get it more quickly. Your tax is also worked out automatically as you fill in the form so you'll know what you owe - or are owed - right away.
If you've got complex tax affairs - for example if you earn money from rents or investments above a certain level - you may need to complete a tax return. You may have to do this even if you're already in PAYE. But if you are in PAYE, you may still be able to pay some or all of your Income Tax this way.
Interest on most savings has 20 per cent tax deducted before you receive it. If you're a basic rate taxpayer you'll have no further tax to pay. If you're a non-taxpayer you may be able to claim some tax back. If you're a higher or additional rate taxpayer you'll have more tax to pay.
Some taxpayers may need to fill in a tax return or a form P810 Tax Review Form to make sure they're paying the right amount of tax.
You may be able to choose how you pay tax on any extra income you receive - either through PAYE throughout the following tax year or through Self Assessment by way of an additional payment.
If you're an employee or a pensioner and you want to pay tax on some of your non-employment income - like investment and rental income - through PAYE rather than by Self Assessment you can ask HMRC to collect it this way. You can do this for up to £2,500 of extra income in a year. If you earn more than £2,500 from savings, investments or rental income you'll need to fill in a tax return.
If you don't want to pay tax on your non-employment income through PAYE, you can ask HMRC to stop collecting it this way. You'll pay through Self Assessment instead. If you want to do this you can register for Self Assessment by completing form SA1. Follow the link below to SA1 Registering for Self Assessment.