When you become an employee, your employer is responsible for deducting tax and National Insurance from your salary, before you receive it. This system is called Pay as you Earn (PAYE).

You will receive paperwork relating to PAYE from HM Revenue and Customs (HMRC) and your employer.

Payslips

Each payday, your employer should give you a payslip. Its a receipt for the tax you’ve paid, showing details such as:

•   your earnings before tax (your gross pay)

•   Income Tax and National Insurance contributions (NICs) that were deducted from your pay

•   your earnings after tax (your net pay).

PAYE Coding Notice

When you start work, HMRC sends you a tax code in a ‘PAYE Coding Notice’. They also send it to your employer, who’ll use it to work out how much tax to deduct from your pay.

Emergency tax code

Your employer may use an emergency tax code until HMRC issues the right one. If you’ve paid too much tax, you will get it back through PAYE.

If you leave your job before you obtain the correct code, or you want to claim tax back for a previous tax year, you can apply to your Tax Office for a refund.

PAYE forms P45, P46 and P60 – what they are and what they mean

The form P45 is a record of your pay and tax deductions. You’ll collect it from your employer when you stop working for them. It shows details such as:

•   your tax code, tax reference number and Tax Office

•   when you were last paid

•   your wages so far in the tax year (6th April to the following 5th April) how much tax was deducted from your wages.

A P45 has four parts. Your employer sends one part to the Tax Office and gives you the other three. When you start a new job, you give two parts to your new employer and keep the other one (called Part 1 A) for your own records.

The form P46 is given to you when you are starting your first job and you don’t have a P45 – your employer will give you a P46 to fill in and sign. HMRC will then process your P46 and issue your tax code.

The form P60 is an annual summary of all your payslips. Your employer gives you one at the end of every tax year. You keep your P60 as a record of your pay and the tax that was deducted.

Student loan repayments

If you have a student loan to repay, repayment will happen automatically through PAYE once you start working and earning more than the repayment threshold.

HMRC gives your employer the information they need to deduct the right amount from your wages. Your payslip must show how much has been deducted. If you have any queries about your student loan repayments, you can contact your Tax Office – look on your PAYE forms for its details.

Keeping records

You should keep the paperwork that contains details about your pay and tax, such as:

•   payslips and coding notices

•   P45 and P60 forms

•   details of taxable expenses

•   information about any redundancy award or termination payment you receive when your contract ends

•   notes of any tips or gratuities you earn and any other taxable income or benefits that you haven’t already recorded somewhere else

•   details of any state benefits you’ve received.

Why do I need to keep records?

You’ll need to refer to your records later if you ever need to:

•   complete a tax return

•   reclaim any overpaid tax

•   apply for benefits and tax credits.

For how long should I keep records?

HMRC suggests you keep your records for at least 22 months for the end of the tax year to which they relate. The tax year runs from 6th April to the following 5th April, so keep paperwork until at least 31st January nearly two years later. 

For further support with this or any other HR issue BVNA members can call the BVNA IRS Helpline on 01822 870270

Author

Nicky Ackerley BA(Hons)

Nicky Ackerley HR Support is owned by Nicky Ackerley who has a BA [Hons] Business Studies Degree, is a member of the Chartered Institute of Personnel and Development and who has been a practising HR manager for over 20 years. HR Support Consultancy has provided the BVNA's Industrial Relations Service since it began in 2002.

• VOL 27 • March 2012 • Veterinary Nursing Journal