How to work out your tax if you are an employee? 

In this part of our starting work guides we look at:

How are employees taxed?

Nearly every UK worker starts the payroll year with a tax-free personal allowance.

For the 2019-20 tax year (tax years run 6 April to 5 April), the basic PAYE tax code is set at 1250L.

Tax codes have different suffixes to show different things, such as whether you are a Scottish taxpayer, or non-resident or on an emergency code, see What is the 2019/20 PAYE code? 

When you start work, your employer will ask you to complete a starter form and they can then use the information you provide to set your PAYE code for that employment.

Basic example

Freya does one job and she earns £15,000 per year, she is paid monthly. Her gross monthly pay is £1,250.

She is entitled to a full personal allowance of £12,000.

Her National Insurance Contributions 'NICsare calculated separately.

Her net pay is £1,136.28 (£1,250-50-63.72).

If Freya took a second job, her tax-free PAYE code would be allocated just one employment based on her earnings. She would then expect that her second job would deduct tax at 20%. For NICs, the limit applies to each job. If she earns less than £166 per week in her second job there are no further NICs to pay. If she earns more than £166 per week in her second job she will have NICs calculated as above.


How to calculate tax if you are self-employed
When you are self-employed you have to account for and pay your own tax and National Insurance Contributions (NICS) to HM Revenue & Customs.


Starting work: Self-employed or employed: what's the difference?
If you are finding work what is the difference between being employed or self-employed?

Special rules that determine whether you are employed or self-employed
Starting work, what kind of worker are you? What are the special rules for certain types of workers?