How do I work out my tax?
If you are an employee, your employer takes income tax and National Insurance contributions (NIC) off your pay before paying you. Your employer sends the tax and NIC to HMRC. You need to be able to work out your tax, so that you can check your employer is deducting the right amount of tax from your pay.
The system your employer uses to collect tax and NIC at source is called Pay As You Earn (PAYE). PAYE spreads your tax and NIC over the tax year. The tax collected under PAYE is an estimate, and is not necessarily the exact amount you are required to pay.
Remember that the tax year runs from 6 April one year to 5 April the next, for example, the tax year 2018/19 runs from 6 April 2018 to 5 April 2019.
If you live in Scotland and are a Scottish taxpayer, you will pay Scottish income tax on your employment income. Different income tax rates and bands apply to your non-savings and non-dividend income. There is more information in our section on Scottish income tax. UK tax rates and bands apply to your savings and dividend income.
Working out your tax position is basically a four-stage process, which we set out in the ‘Tax essentials’ section of our website. In stages one and two, you have to work out your taxable income and any allowances or deductions you are entitled to.
In this 'Employed' section of our website we provide further information on:
- stage one – taxable income, including benefits and expenses; and
- stage two – reliefs and allowances.
that relate specifically to employees.
You have to pay tax on any other taxable income that you have in the tax year, too. So, if you have any other taxable income, you need to include this in your calculations.
HMRC have online tools to help you check the tax you are paying in the current year and have paid in past tax years. These can be found on GOV.UK. In order to access these services you need to have a Government Gateway account.