HMRC – stands for Her Majesty’s Revenue & Customs - is the department of the government responsible for collecting taxes. This is what people mean when they talk about ‘the taxman’.
These are some of the types of tax HMRC covers:
- Income tax National Insurance
- Corporation tax Capital gains tax
- Motoring taxes Inheritance tax
- Stamp duty Insurance Premium Tax
- Air Passenger Duty PAYE
- And so forth
It's a really long list!
In this article, we are only going to look at PAYE.
PAYE – or Pay as You Earn – is a type of income tax. It is the amount that is automatically deducted from your salary on your payslip each month before you even get a sniff of it. HMRC gives you a special tax code and your tax code determines how you will pay tax and your employer uses your tax code to deduct the correct amount from your salary each month and give it to HMRC.
PAYE is applied to your normal salary, sick pay, maternity pay, directors’ fees, and pensions.
Read also: 8 Tips to Reduce Your Payroll Costs