What is PAYE

Everything you need to know about the Pay As You Earn system

Most workers in the UK are classed as PAYE workers in terms of how they pay tax – PAYE means Pay As You Earn. But what does that mean? We at DSR Tax Claims are experts in all matters tax so let us answer all the questions you might have about PAYE. And if you get to the bottom of the guide and you still have a question, give our friendly team a call on 0330 122 9972 and let us help you.

So, what is PAYE?

The PAYE (Pay As You Earn) scheme is the way that HMRC collects tax from the majority of workers in the UK. HMRC give you a tax code (see our helpful guide on tax codes for more information) which tells your employer how much tax to take from your wages. Your employer then sends that tax to the HMRC on your behalf and gives you what is left after those deductions. Usually that is all there is to it – no need for you to do anything, other than keep an eye on those payslips and your end of year P60 to make sure you’re not paying too much tax. And if you think you are, give DSR Tax Claims a call on 0330 122 9972 and let us sort it out for you.

How PAYE is worked out

Every PAYE employee has a tax code – a combination of numbers and letters – which tells your employer how to tax your wages. The number relates to your personal tax-free allowance, that is how much you are allowed to earn before you have to pay any tax. If you want to know how much that is, just multiply it by 10.

The letter in your tax code applies to your personal circumstances, for example if you are receiving some of your spouse’s personal allowance. Our handy tax code guide can tell you more about those mysterious letters. Do make sure that your tax code is correct, otherwise you may end up paying too much tax.

As a PAYE employee, you may also have to fill in a Self-Assessment Tax Return if you also receive income from other sources, such as rental income or income from savings, on top of your earnings from your job. You will also need to fill one in if you are a Higher-Rate Tax Payer or you have taxable expenses above £2,500.

Who does PAYE apply to?

It only applies to employed people – that is people who are employed by someone else. If you are self-employed that PAYE doesn’t apply to you. Instead you will need to use the Self-Assessment system to inform HMRC of how much you earn and to calculate how much tax you owe HMRC.

Can you get a tax refund if you are a PAYE worker?

You sure can! It isn’t only self-employed people who can claim a tax rebate, many PAYE workers may also be entitled to money back from HMRC. Maybe you are incurring expenses out of your own pocket as a part of your job (accommodation or travel due to a temporary work location, for instance) – if so, you are entitled to this money back. If you think this applies to you, why not check out the DSR Tax Claims refund calculator to see how much you could be entitled to claim. Or give our friendly and professional team a call on 0330 122 9972 and let us calculate your rebate for you. After all, we are the specialists at getting you your maximum rebate fast!

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