business & tax

Income Tax Employed

PAYE - Pay As Your Earn - Employment Income

Employees pay normal income tax as earned income by deduction at source by the employer.  This is known as PAYE deductions. 

The employer then forwards any taxes deducted to HM Revenue and Customs by the 19th of the following month.

PAYE - Pay As Your Earn - Pensioners Income 

Pensioners in receipt of pension annuity income also pay normal income tax as earned income by deduction at source by the pension annuity provider.  The pension company again forwards tax deducted to HM Revenue and Customs under the same PAYE system as employers.

State pensions:  State pensions are taxable but they are paid with no deduction for tax, but your tax code allowance is reduced meaning that you pay more tax on your other pension income.

Age Allowance

Pensioners over the age of 65 may also receive an increased tax free income allowance.

What is taxable?

Employment income includes salaries, fees, bonuses, benefits in kind and pension income.

All these are assessed in the year in which the income is received or the benefit is enjoyed.

P60

Each year, your employer or your pension company, if you are retired, will send you a copy of your p60.  This is the yearly statement of income received and tax deducted. 

You may need to use these figures for your self assessment tax return.

Buy a tax planning pack in the shop or request tax advice today.