PAYE Scheme

The Pay As You Earn scheme, or PAYE scheme as it is commonly known, enables your employer to deduct income tax (see Income Tax) from your salary. Your take-home pay will already have been taxed and you will not need to pay extra tax via your tax return at the end of the year for your salary. Your employer has the responsibility of paying your taxes to Her Majesty's Revenue and Customs. Paying income tax through the PAYE scheme also enables you to pay tax on all your sources of income at one time; if income tax is deducted from you earnings through PAYE, income tax can be simultaneously deducted from your occupational and state pensions. Although it may seem that you have paid a lot of tax as a result, you will not usually be required to pay more tax on these sources of income when you complete your tax return at the end of the year. You will still be required to pay tax on any sources of taxable income that have not been taxed via PAYE during the year when you complete your tax return.

Your employer is informed of your tax code by the tax office. This code is used to calculate how much tax your employer must deduct from your salary. The tax code you are given will depend on factors such as your age, the age of your dependants, your total taxable income and your income tax personal allowance. You may receive a notice of coding which details the code you have been given and the reasons why. If you feel that you have been given the wrong tax code, or been charged too much tax for another reason, contact your local Citizens Advice Bureau or request assistance from an independent financial advisor.