Totally new to taxes, unsure about National Insurance, or baffled by tax codes and PAYE?
Our Tax section gives a basic introduction to the UK tax system, what you pay and how you pay it, plus where to find more information and help if you need it.
Simple Guides in our Tax Section:
Introduction to the UK tax system
What is tax & how you pay it
Help with Tax
Contacts & online resources to help with tax issues, plus a helpful jargon buster for tax terms
What we pay through the tax system:
Income Tax
Find out what you need to pay, check the current tax bands & rates, plus allowances & reliefs that can reduce your tax bill
National Insurance
Why we pay National Insurance, how the system works, plus what to do if you have paid too much or too little
Student Loan Repayments
How you repay your Student Loan
How we pay through the tax system:
How tax is collected via PAYE (Pay As You Earn scheme) if you work for an employer
How to check if you’ve paid the right amount of tax, & what to do if not
The Self Assessment system for the self-employed, or if you have other types of income
How the system works, plus tips for managing your tax affairs
The UK Tax System
In this section:
What is tax?
How we pay tax
Personal tax account
Tax tool
What is Tax?
Tax is a compulsory contribution paid to the Government to fund public services such as the NHS, education and the welfare system, as well as law enforcement, defence, housing and transport.
UK taxes include direct taxes – levied on income, wealth or profits – which are paid by an individual or organisation directly to the Government. These include Income Tax, Capital Gains, Inheritance Tax and Corporation Tax (tax on company profits).
We also pay indirect taxes charged on goods and services. The tax is included in the purchase price, and is then paid to the Government by the supplier. Examples are VAT (Value Added Tax) and the duty on alcohol, cigarettes and fuel.
The tax system is complex, and it includes a wide range of allowances, reliefs and exemptions, plus some different rules for countries within the UK. So our Tax sections will give you a basic outline, with links to further information and help. Do seek advice relevant to your own situation, from HMRC or a professional adviser.
How we Pay Tax
Most UK taxes are collected and managed by HMRC (Her Majesty’s Revenue & Customs).
What we pay through the tax system
Income Tax is charged on most types of income:
Non-savings income e.g. salary and wages from employment, rent you receive as a landlord, or business profits for the self-employed
Savings Income e.g. interest from savings or dividend payments from investments
National Insurance payable on earned income, or on business profits for the self-employed
Student Loan Repayments
Although they are not a tax, student loan repayments are deducted from income, therefore the tax system is a convenient way for the Government to collect money owed.
Pension Contributions
If you are enrolled in a workplace pension scheme, you and your employer pay a percentage of your earnings into the scheme. The Government also adds to your pension pot in the form of tax relief on pension payments.
How we pay through the tax system
The way you pay tax depends on your circumstances:
If you work for an employer, Income Tax, National Insurance and any pension contributions or student loan repayments are collected automatically via the PAYE (Pay As You Earn) scheme before you even receive your salary or wages. Your tax code informs your employer how much to deduct.
If you are self-employed, or have other sources of income, you make these payments directly to HMRC through the Self Assessment system.
Personal Tax Account – manage your tax affairs online
Similar to online banking, this is HMRC’s service for individuals to manage their tax affairs online. You can view all your info relating to Income Tax, National Insurance, State Pension and welfare benefits. You can make changes online and contact HMRC.
Some of the services you can access include changing personal details, claiming a tax refund, checking your NationaI Insurance record to see if there are any gaps (which could affect eligibility for benefits and pension). Employed (PAYE) customers can see your Income Tax estimate for the year or check your tax code. Self-employed and Self Assessment customers can complete and submit your Tax Return online.
Personal tax account: sign in or set up – GOV.UK
Personal tax accounts – HMRC’s online service for individuals
(Video – 2 mins) How to set up your account & what it does
The tax year runs from 6 April to 5 April
Tax rates, bands of taxable income and allowances may change each tax year
Tax Tool: Should I pay Income Tax & National Insurance contributions?
Use this simple tool to work out whether you need to pay any Income Tax, National Insurance and Student Loan repayments. (If you have a Student Loan, check ‘Advanced Options’). It gives a guide to how much you will owe and your remaining take-home pay.
Find out more:
Learn about Income Tax, National Insurance and Student Loan repayments, including when you have to start paying them, how much you’ll have to pay and other need-to-know info.
