The end of the tax year, 5th April 2021, marks the time you need to work on your tax return. To avoid penalties, you must 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 through the PAYE scheme, a system for collecting the tax 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. Your employer will determine how much tax will be deducted from your weekly or monthly payments.
For instance, if your tax code is 1250L, the last three digits will be multiplied by 10 to determine how much you can 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.
National Insurance contributions will also be deducted on top of the PAYE Tax.
Your employer will give you a payslip each time you are paid.
Your payslip must contain:
- Your gross income—wages before any deductions are made
- Individual or the total amount of fixed deductions like trade union subscriptions
- The 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.
If 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 the 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 the 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 the 5th of April, you should receive the form at the specified date because employers must give it to all employees on their payroll.
The form P60 will show your pay, deductible tax, and the final tax code. 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 claiming tax back and/or more information about tax returns UK laws. You may also wish to complete a UK Self Assessment tax return online.