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 HM Revenue & Customs (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 2016/17 runs from 6 April 2016 to 5 April 2017.
Working out your tax position is basically a four stage process, which we set out in the ‘tax basics 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:
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 a tax checker calculator, which you may be able to use if your tax affairs are simple and all of the following apply:
- you pay tax at 20% or 40%; and
- you get the basic personal allowance or the blind person's allowance on top of that.
You can find the tax checker on GOV.UK.