Employee Support

Income Tax is a tax you pay on your income.

You pay tax on things like:

• money you earn from employment
• profits you make if you’re self-employed – including from services you sell through websites or apps
• some state benefits
• grants and support payments made to you or your business because of coronavirus, including the Self-Employment Income Support Scheme, the Coronavirus Job Retention Scheme, the Small Business Grant Fund or the Retail, Hospitality and Leisure Grant Fund – read about reporting coronavirus grants and support payments
• the Test and Trace Support Payment in England (or the Self-isolation Support Payment in Scotland and the Self-isolation Support Scheme in Wales)
• most pensions, including state pensions, company and personal pensions and retirement annuities
• rental income (unless you’re a live-in landlord and get less than the rent a room limit)
• benefits you get from your job
• income from a trust
• interest on savings over your savings allowance

You do not pay tax on things like:

• the first £1,000 of income from self-employment – this is your ‘trading allowance’
• the first £1,000 of income from property you rent (unless you’re using the Rent a Room Scheme)
• income from tax-exempt accounts, like Individual Savings Accounts (ISAs) and National Savings Certificates
• dividends from company shares under your dividends allowance
• some state benefits
• premium bond or National Lottery wins
• rent you get from a lodger in your house that’s below the rent a room limit

Most people in the UK get a Personal Allowance of tax-free income. This is the amount of income you can have before you pay tax.

The amount of tax you pay can also be reduced by tax reliefs if you qualify for them.

The personal allowance for tax year 2023/2024 is £12,570, if you are being paid through payroll this means you tax code should be 1257L.  The allowance means earnings up to £12,570 will not have tax deducted.  This is a yearly allowance so you won’t receive the allowance in one go, it depends on which month you are being paid.  If you are being paid for month 2, the allowance up to this date would be the yearly amount divided by 12 and multiplied by 2.

If your tax code is different to 1257L it could mean you have income elsewhere, a benefit in kind or you have underpaid tax previously.  If you check your payslip and are unsure whether it is correct or not then you would need to contact HM Revenue & Customs, your employer will not be able to do this for you, your tax code is your responsibility

Pay As You Earn (PAYE)

Most people pay Income Tax through PAYE. This is the system your employer or pension provider uses to take Income Tax and National Insurance contributions before they pay your wages or pension. Your tax code tells your employer how much to deduct.

Tax on state benefits

Your tax code can take account of taxable state benefits, so if you owe tax on them (for example for the State Pension) it’s usually taken automatically from your other income.

If the State Pension is your only income, HM Revenue and Customs (HMRC) will write to you if you owe Income Tax. You may need to fill in a Self Assessment tax return.

Self Assessment tax returns

If your financial affairs are more complex (for example you’re self-employed or have a high income) you may pay Income Tax and National Insurance through Self Assessment. You’ll need to fill in a tax return every year.

You must also fill in a Self Assessment tax return if you earned more than either:

• £1,000 from self-employment
• £2,500 from other untaxed income, for example from tips or renting out a property

Contact the Income Tax helpline if your income from renting out a property was between £1,000 and £2,500.

National Insurance is a tax on earnings and self-employed profits.

Your National Insurance contributions are paid into a fund, from which some state benefits are paid.

This includes the state pension, statutory sick pay or maternity leave, or entitlement to additional unemployment benefits.

You have a National Insurance number to make sure your National Insurance contributions and tax are recorded against your name only.

It’s made up of letters and numbers and never changes.

You can find your National Insurance number:

• on your payslip
• on your P60
• on letters about your tax, pension or benefits
• in the National Insurance section of your personal tax account

Who uses your National Insurance number

These organisations need to know what your number is:

• HM Revenue and Customs (HMRC)
• your employer
• the Department for Work and Pensions (which includes Jobcentre Plus and the Pension, Disability and Carers Service), if you claim state benefits, or in Northern Ireland the Department for Social Development
• your local council, if you claim Housing Benefit, or the Northern Ireland Housing Executive
• Electoral Registration Officers (to check your identity when you register to vote)
• the Student Loans Company, if you apply for a student loan
• your pension provider if you have a personal or stakeholder pension
• your Individual Savings Account (ISA) provider, if you open an ISA
• authorised financial service providers who help you buy and sell investments like shares, bonds and derivatives – you can check if your provider is authorised
• Veterans UK

Proving your National Insurance number

You can use your personal tax account to:

• view, save or print a letter confirming your National Insurance number
• save your National Insurance number to your Apple Wallet – if you have an Apple device

If you do not have a personal tax account, you can:

• set up an account
• contact HMRC to ask for a letter confirming your National Insurance number

National Insurance pay is  mandatory if you’re 16 or over and are either:

• an employee earning above £242 a week
• self-employed and making a profit of more than £12,570 a year

There are different types of National Insurance (known as ‘classes’).

The type you pay depends on your employment status and how much you earn.

When you stop paying

If you’re employed, you stop paying Class 1 National Insurance when you reach the State Pension age.

If you’re self-employed you stop paying:

• Class 2 National Insurance when you reach State Pension age
• Class 4 National Insurance from 6 April (start of the tax year) after you reach State Pension age

A workplace pension scheme is a way of saving for your retirement through contributions deducted direct from your wages. Your employer may also make contributions to your pension through the scheme. If you are eligible for automatic enrolment, your employer has to make contributions into the scheme.

All employers must provide a workplace pension scheme. This is called ‘automatic enrolment’.

Your employer must automatically enrol you into a pension scheme and make contributions to your pension if all of the following apply:

• you’re classed as a ‘worker’
• you’re aged between 22 and State Pension age
• you earn at least £10,000 per year (£833.33 per month)
• you usually (‘ordinarily’) work in the UK (read the detailed guidance if you’re not sure)

Your employer usually does not have to automatically enrol you if you do not meet the previous criteria or if any of the following apply:

• you’ve already given notice to your employer that you’re leaving your job, or they’ve given you notice
• you have evidence of your lifetime allowance protection (for example, a certificate from HMRC)
• you’ve already taken a pension that meets the automatic enrolment rules and your employer arranged it
• you get a one-off payment from a workplace pension scheme that’s closed (a ‘winding up lump sum’), and then leave and rejoin the same job within 12 months of getting the payment
• more than 12 months before your staging date, you left (‘opted out’) of a pension arranged through your employer
• you’re from an EU member state and in an EU cross-border pension scheme
• you’re in a limited liability partnership
• you’re classed as a ‘director’ without an employment contract and employ at least one other person in your company

You can usually still join their pension if you want to. Your employer cannot refuse.

What happens when you’re automatically enrolled

Your employer must write to you when you’ve been automatically enrolled into their workplace pension scheme. They must tell you:

• the date they added you to the pension scheme
• the type of pension scheme and who runs it
• how much they’ll contribute and how much you’ll have to pay in
• how to leave the scheme, if you want to
• how tax relief applies to you

Delaying your enrolment date

Your employer can delay the date they must enrol you into a pension scheme by up to 3 months.

In some cases they may be able to delay longer if they’ve chosen either:

• a ‘defined benefit’ pension
• a ‘hybrid’ pension (a mixture of defined benefit and defined contribution pensions) that allows you to take a defined benefit pension

Your employer must:

• tell you about the delay in writing
• let you join in the meantime if you ask to

What your employer cannot do

Your employer cannot:

• unfairly dismiss or discriminate against you for being in a workplace pension scheme
• encourage or force you to opt out

Your employer does not have to contribute to your pension if you earn these amounts or less:

• £520 a month
• £120 a week
• £480 over 4 weeks

The amount you and your employer pay towards the pension depends on:

• what type of workplace pension scheme you’re in
• whether you’ve been automatically enrolled in a workplace pension or you’ve joined one voluntarily (‘opted in’)

Use MoneyHelper’s contributions calculator to work out how much you and your employer will put in.

Tax relief

The government will usually add money to your workplace pension in the form of tax relief if both of the following apply:

• you pay Income Tax
• you pay into a personal pension or workplace pension

Even if you do not pay Income Tax, you’ll still get an additional payment if your pension scheme uses ‘relief at source’ to add money to your pension pot.

If you’ve been automatically enrolled

You and your employer must pay a percentage of your earnings into your workplace pension scheme.

How much you pay and what counts as earnings depend on the pension scheme your employer has chosen. Ask your employer about your pension scheme rules.

In most automatic enrolment schemes, you’ll make contributions based on your total earnings between £6,240 and £50,270 a year before tax. Your total earnings include:

• salary or wages
• bonuses and commission
• overtime
• statutory sick pay
• statutory maternity, paternity or adoption pay

Workplace pension contributions

These amounts could be higher for you or your employer because of your pension scheme rules. They’re higher for most defined benefit pension schemes.

In some schemes, your employer has the option to pay in more than the legal minimum. In these schemes, you can pay in less as long as your employer puts in enough to meet the total minimum contribution.

If you’ve voluntarily enrolled in a workplace pension

Your employer must contribute the minimum amount if you earn more than:

• £520 a month
• £120 a week
• £480 over 4 weeks

They do not have to contribute anything if you earn these amounts or less.

How your take-home pay changes

Joining a workplace pension scheme means that your take-home income will be reduced. But this may:

• mean you’re entitled to tax credits or an increase in the amount of tax credits you get (although you may not get this until the next tax year)
• mean you’re entitled to an income-related benefit or an increase in the amount of benefit you get
• reduce the amount of student loan repayments you need to make

Payments using salary sacrifice

You and your employer may agree to use ‘salary sacrifice’ (sometimes known as a ‘SMART’ scheme).

If you do this, you give up part of your salary and your employer pays this straight into your pension. In some cases, this will mean you and your employer pay less tax and National Insurance.

Ask your employer if they use salary sacrifice.

All employers must give all employees and workers a payslip by law (Employment Rights Act 1996).

We can supply payslips via email, but our most popular way is via an online system.  If your employer opts for our online portal you will receive an invitation for your own access, this can be done on a PC or a mobile app.  This system is fully GDPR compliant, you will set your password and neither your employer or us will know what it is, if you forget it just simply click on the forgotten password option when trying to login.  You can access all your payslips from when we started processing the payroll and any other documents relating to payroll each time the payroll is processed you will receive an email to let you know your payslip can be viewed.

A payslip must include:

• total pay before deductions (gross amount)
• total pay after deductions (net amount/take home amount)
• amounts of any variable deductions, where the amounts depend on the amount of pay, for example tax, National Insurance, Student Loan repayments and pension.
• Variable hours
• Other third party deductions, such as attachment of earnings, earnings arrest etc
• Other deductions, such as subscriptions, health care plan etc

The payslips may also include:

• The period you are being paid for
• tax code

If you think there is an error on your payslip you should speak directly with your employer as soon as possible.

If you don’t receive your payslip when expected contact your employer.  It may be that they have the incorrect email address for you which can be easily resolved.