Statutory Deductions

Your P60 provides a statement of your earnings and statutory deduction for a given tax year. This is issued to employees by 31st May each year, provided you are in our employment on the last day of the tax year (5th April). Keep this form safe as you may not be able to get a copy. Your P60 can be used as proof of earnings for tax credits, benefits, etc or to help you complete a self-assessment tax return.

 

Tax

The Pay as you Earn (PAYE) system is a method of paying income tax. Tax is deducted from your wages or occupational pension before paying you your salary. This means that you pay tax over the whole year, each time you are paid. Your employer is responsible for sending the tax on the HM Revenue and Customs.

Your tax code is normally expressed as a number and a letter (e.g. 1100L) and this determines your tax-free allowances.

If your tax code is 1100L, you are entitled to £11,000 tax-free allowances during the course of the tax year. This will be in either 12 or 52 equal amounts depending on your pay frequency. It does not mean that you do not pay tax until you have earned £11,000.00

BR means that you are being taxed at basic rate (20%) and are not receiving any tax-free allowances. You should submit a P45. If you do not have a P45 we will refer to the starter declaration on your new starters form to place you on the relevant Tax Code.

 

0T - This is a code that means you have no allowances taken into consideration. It is usually used if we have received no notification of a tax code (via a Starter Declaration/P45 or HMRC). 

National Insurance

You pay National Insurance Contributions (NICS) to build up your entitlement to certain social security benefits, including the State Pension. The type and level of NIC you pay depends on how much you earn and whether you are employed or self-employed. You stop paying NICs when you reach State Retirement age.

The default National Insurance letter is category A and is standard rate NI. If an employee is over State Pension Age they should be on category C and no contributions are applicable to the employee.

 

A – Standard Rate NI,  Employees pay 12% and then 2%

 

C – For employees who have reached state retirement age. No NI is due.

 

NI Thresholds

 

The percentages above are payable where earnings have reached the levels below:

 

For tax year 2016/17 the monthly amounts are:

 

£0 - £672 = No NI Due

 

£672 - £3583 = 12 %

 

£3583 and over = 2% NI due

 

The NI contribution letter dictates the amount of NI payable. 

PLEASE NOTE: HMRC do not communicate by email. If you receive an email from 'HMRC' notifying you of a tax refund or any other message, please delete it immediately as it will be a scam!