In this section:
- Income Tax - the basics
- Taxable and non-taxable income at a glance
- Should you be paying Income Tax?
- Ways you pay Income Tax
Ways you pay Income Tax
You pay Income Tax in different ways - depending on your income and your employment status. These ways include PAYE (Pay As You Earn), Self Assessment (SA), tax deducted 'at source' and one off payments.
If you're an employee or receive a company pension
If you're an employee your employer will deduct Income Tax from your wages throughout the year using the tax code we provide to them and send it to us. If you get a pension, your pension payer will deduct tax in the same way. This system of collecting Income Tax is known as Pay As You Earn - usually shortened to PAYE.
If your circumstances change and we give you a new tax code, we'll send you a 'PAYE Coding Notice'. This tells you what your tax code is and how we've worked out the tax-free income you can receive. Keep all notice of coding letters in case you've got any questions or need to check you're paying the right amount of tax.
At the end of the tax year we may also send you a P810 Tax Review Form. This is a simple one page form that we use to check that your tax code is still correct. If you get form P810 you'll need to fill it in and send it back as soon as you can. If you prefer you can call the number on the form and give us the information over the phone. You can tell us about other income you've received or about changes that may reduce your tax bill. If the information you give shows that you're paying the wrong amount of tax, we can change your tax code straight away to correct this.
If you have complex tax affairs you may also have to complete a Self Assessment tax return.
Get details of tax codes and tax code notices
Find out about working and paying tax
Get details of how your pension income is taxed
If you're self-employed
If you're self-employed you'll need to complete a Self Assessment tax return. You can fill in a paper form or complete and file your return online. You'll probably need to pay any Income Tax you owe for a tax year in two instalments plus a final 'balancing payment'.
Find out about tax for the self-employed
More about filing your tax return online
If you've got complex tax affairs
If you've got complex tax affairs - for example if you earn money from rents or investments above a certain level - you may need to complete a tax return. You may have to do this even if you're already on PAYE. But if you are on PAYE, we may still be able to collect some or all of your Income Tax this way.
Read an introduction to Self Assessment
Find out if you need to fill in a tax return
Income Tax deducted at source from savings income
Interest on most savings has 20 per cent tax deducted before you receive it. If you're a basic rate taxpayer you'll have no further tax to pay. If you're a non-taxpayer you may be able to claim some tax back. If you're a higher rate taxpayer you'll have more tax to pay.
Some taxpayers may need to fill in a tax return or a form P810 Tax Review Form to make sure they're paying the right amount of tax.
Get information about tax on bank and building society accounts
Get tax-free interest on savings and claim tax back
How to pay tax on extra income
You may be able to choose how you pay tax on any extra income you earn - either through PAYE throughout the following tax year or through Self Assessment by way of an additional payment.
If you're an employee or a pensioner and you want to pay tax on some of your non-employment income - like investment and rental income - through PAYE rather than by Self Assessment you can ask us to collect it this way. You can do this for up to £2,500 of extra income in a year. If you earn more than £2,500 from savings, investments or rental income you'll need to fill in a tax return.
If you don't want to pay tax on your non-employment income through PAYE, you can ask us to stop collecting it this way. You'll pay through Self Assessment instead. If you want to do this you can register for Self Assessment Online (if you're not already registered). Or you can download a paper tax return to complete. Send this to us with a letter to say you want to pay tax through Self Assessment.
Filling in your tax return online is easy and quick - and you can do it at any time of the day or night. Online tax returns are processed faster than paper returns, which means that if we owe you any money you'll get it more quickly. Your tax is also worked out automatically as you fill in the form so you'll know what you owe - or are owed - right away.
Get information about tax for the employed
Find out about Self Assessment Online
Get a Self Assessment tax return (2007)
More useful links
You can find more information that will help you to understand the different ways of paying Income Tax and when you'll pay tax through PAYE or Self Assessment. Follow the links below.
Check Income Tax rates and allowances
