Income Tax
As a general rule you will have to pay income tax to the Inland Revenue. If your income exceeds the tax allowance appropriate to you in any tax year. A tax year runs from the 6th April to the 5th April. Not all income is taxed, but some benefits are.
In 2010/11 the Personal Allowance for an individual under the age of 65 is £6,475. When you are in employment the allowance is divided into 52 weeks. You will normally, therefore, be able to earn £124.50 each week before your employer deducts tax. You cannot have a Personal Allowance of more than £124.50 per week even if you have 2 or more jobs.
The Inland Revenue will issue a code number to you that will indicate the amount of allowances to which you are entitled. Your employer will use this code to calculate the amount of Income tax due which they will deduct from your earnings each week. This system is called PAYE (Pay As You Earn).
If you change jobs or come off benefits, it is very important that you obtain a P45 and give this to your new employer. This P45 shows your earnings and tax paid upto the date that you left the last job or came off benefits and your new employer will need these details to ensure that the correct amount of tax is deducted from your pay from the start of your new job. You may even be entitled to a repayment and again your new employer needs a P45 to deal with this.
At the end of a Tax Year, your employer will give you a form P60 which is a statement of your earnings and tax paid in that year. If you think that you are not paying the right amount of tax please contact your Tax Office.
Students are liable for tax, just like everyone else, if their income exceeds the Personal Allowance. If however, you are a full-time student and you work only in vacation/holiday time and your yearly income does not exceed the Personal Allowance, then you can complete a form P38(S) that allows you to receive your wage without deduction of tax. This concession does not apply if you work at weekends or any other time outside of vacation/holiday periods. This concession also does not apply to National Insurance contributions.
Keep your payslips for at least 2 years and keep any other tax records such as P45 and P60 for at least 7 years. You may need these if you contact the tax office for a repayment or if you think you’re not paying the right amount of tax. They could also be useful for other things such as a mortgage application. Useful websites to look at include:
