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From 6 January 2024, the main rate of class 1 National Insurance contributions (NIC) deducted from employees’ wages is reduced from 12% to 10%. From 6 April 2024, the main rate of self-employed class 4 NIC will reduce from 9% to 8% and class 2 NIC will no longer be due. Those with profits below £6,725 a year can continue to pay class 2 NIC to keep their entitlement to certain state benefits. Our guidance will be updated in full in spring 2024.

Updated on 6 April 2023

Employment

Our employment pages provide further details for employees on a low income about the tax and National Insurance implications of employment.

Content on this page:

Introduction

Most people who work in the UK are employed. You can find more information about how to tell if you are employed or self-employed on our page Employment status.

If you are an employee, your employer will usually deduct tax from your pay and send it to HM Revenue and Customs (HMRC) on your behalf.

You may have to deal with HMRC yourself though, if you do not understand something or if you disagree with something – HMRC and employers do not always get things right. It is therefore important that you are able to check the tax you are paying on your employment income is correct. You should be able to see information in relation to your pay and taxes in your online personal tax account.

Paying tax on employment income

HMRC require employers to deduct tax from your wages or salary under the pay as you earn (PAYE) system.

This applies to you whether you work for an employer full-time or part-time, permanently or temporarily, and also if you are employed on a casual basis.

Under the PAYE system, HMRC use a system of codes to tell employers how much tax to deduct from your wages or salary. The aim is to collect the correct amount of tax each time you are paid and to spread your tax allowances evenly throughout the year. This means that you get the benefit of having your tax collected evenly throughout the year, rather than having to pay it in one big lump sum. Hopefully, at the end of the year you will have paid approximately the correct amount of tax. You do still need to check your own taxes, however, as the PAYE deduction may not always be right.

There is information about PAYE in our Tax and NIC pages. This includes information about what to do if PAYE does not collect enough tax from you, or if your employer has made an error with your PAYE.

We also have guidance on paying too much tax through PAYE.

Read our separate page on PAYE coding notices to make sure you understand how you are being taxed. That page also tells you what to do if you do not understand your coding notice or think it is wrong.

In addition to income tax being deducted under PAYE, National Insurance contributions (NIC) are also collected through PAYE. You can read more about this on our page NIC for employees.

More information

There is a general collection of information on GOV.UK for those in employment, including on pay, tax and the national minimum wage.

If you are self-employed, we suggest you also visit our pages on Self-employment.

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