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Taxation: PAYE Deductions

There are two types of deductions in the UK that apply to you - PAYE (Pay As You Earn) and NI (National Insurance).

PAYE

The UK tax year runs from 6 April to 5 April the following year.
The taxation thresholds for the 2015-2016 and the 2016-2017 tax years are as follows:

Taxable Band Allowances 2015-16 (£)
Standard Tax Free Personal Allowance First £10,600 earned over the year
Basic rate 20% 0 to £32,010
Higher rate 40% £32,011 to £150,000
Additional rate 45% Over £150,000

Taxable Band Allowances 2016-17 (£)
Standard Tax Free Personal Allowance First £11,000 earned over the year
Basic rate 20% 0 to £32,000
Higher rate 40% £32,001 to £150,000
Additional rate 50% Over £150,000

To complete your tax return you must keep details of the following:

  • Copies of all your P45s - these are the tax certificates you get when you leave an employer. You may have more than one in a year (depending on the number of employers you worked for).
  • Your P60 - this is the end of year tax certificate issued by your current employer (please note, you will only ever receive a P60 if you were in employment at the end of the tax year, otherwise your P45s will suffice).

National Insurance

National Insurance provides for unemployment and social security benefits, state pensions and the National Health Service (NHS). You are required by law to obtain a National Insurance number. For information regarding obtaining your National Insurance number, please refer to the Frequently Asked Questions.

In addition to PAYE, National Insurance is automatically deducted from your gross wages. Please see the below table, which shows the contributions payable to the relevant earnings band.

Earning Limit Employee's Contribution
£112 to £155 weekly 0%
£155 to £815 weekly 12%
Over £815 weekly 2%

Tax Office Information

For Contractors based in England: For Contractors based in Scotland:
The Inland Revenue
Chapel Wharf Area
Trinity Bridge House
2 Dearmans Place
SALFORD
M3 5BS
Ref: 951/JZ17858
Phone: 0845 300 0627

The Inland Revenue
Centre 1
East Kilbride
G79 1AA
Ref: 961 65 03437
Phone: 0845 300 0627
 

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