If you’re in work, you will need to pay Income Tax and National Insurance on your wages through the Pay As You Earn (PAYE) system.
However, you are allowed a certain level of income each year, called your Personal Allowance, before you need to pay any Income Tax at all. You will also pay National Insurance contributions if you earn more than £155 a week.
For most of us, your Personal Allowance is spread evenly across your pay packets for the year and your employer will take tax out before giving you your pay.
Your employer will also make National Insurance deductions from your pay. This is worked out depending on the frequency you get paid (ie: weekly or monthly). Unless there has been a mistake, you cannot get back any of the National Insurance you pay, even if your earnings fall later in the year.
It’s worth checking how much tax you’ve paid on your wages. If you think you’re paying too much tax, you can check if you’re due a refund by using the HMRC online tax checker.
If you have paid too much, you may be able to ask for a refund using a form, or you may need to contact HMRC directly.
Even when you retire, you still have to pay Income Tax on all your pension income, including the State Pension. This may be a surprise – many people assume their pension income – especially the State Pension - will be free from tax, but that’s not the case. Some income, including your State Pension, is paid without any tax being taken off.
If tax is due, this will often be collected by taking money off any company pension payments or when you take money out of a workplace or personal pension.
Try our financial education module to help you get to grips with it all or contact the following organisations for advice: