How is Income Tax deducted?

If you are an employee you should get a payslip every week or month which will give you details of how much Income Tax and National Insurance you are paying and what your tax code is.  For information about tax codes >>

When you started the job - if you did not have a form P45 to hand in from a previous job, your employer should have asked you to complete and sign a form P46. He will then use this to ensure you get the correct code number to operate on your wages.

It's very important that you are paying tax at the right rate. If your employer doesn't know your tax details you may be put on an emergency tax code which means paying higher tax than you need to (although you will be able to claim it back when your tax code is corrected – this is normally done automatically through your pay when it is corrected before the end of the tax year. Otherwise you will need to claim it back).

If you think that your tax code is wrong and you have already completed a form P46 or handed in your P45, contact your tax office. Your employer can give you details. You will need to tell them:

• your tax reference number;
• your national insurance number;
• the name and address of your employer.

They should get your code changed and give you a tax rebate if you have paid too much. However rather than having to get a refund it's much better to get yourself on the right tax code at the start of your employment by giving your P45 to your employer if you have one or by getting your employer to send a form P46 to HMRC for you. You can download a form P46 >>

The taxation scheme for employees is called Pay-As-You-Earn (PAYE). The idea of PAYE is to try to make sure you have paid the right amount of tax due on your income by the end of the tax year. The tax is collected from each weekly or monthly payment of salary that you receive so that if it is correctly operated, you should have no additional tax to pay on your wages at the end of the year.

A lot of students have two or more jobs – you will always be taxed at 20% on any second or subsequent job and this may mean you overpay tax for the year. Keep a check on this and if you think you will need a repayment contact the tax office dealing with your main job.