Your first job and paying tax through PAYE
When you start a job and acquire the status of employee, you have to pay tax at the pay as well as the benefits that you are getting from the job. However, you do not have to worry about many things at this stage. Your employer will be responsible for filing the tax at your behalf. Income tax and National Insurance will be paid out of your pay before you will receive it. Your employer will take care of that and you will not have to worry about anything at all.
The system enables this automatic deduction of tax before you get the salary is called PAYE. PAYE stands for Pay As You Earn. In order to make the process smooth, you will be provided the forms that you will have to fill. Your employer as well as tax authorities will provide these forms for you to complete the paperwork.
When you are getting the pay slip on each day, it means that you have paid the tax. The pay slip acts as a receipt of your tax. It will contains your earnings before paying the tax i.e. your gross pay, Income tax and other relevant payments that you are supposed to pay and your tax code. The pay slip will also contain your net pay. The net pay is the amount of money that you will get after all the necessary deductions.
Before a tax code is issued to you, your employer will be using an emergency tax code. This may result in higher tax being paid by you. You can always get refund after getting the right tax code. However, if you quit the job before the right tax code is issued, you can still get the refund following a different procedure laid out by the tax authorities.
In case, you have a student loan payment to make every month, it will be automatically deducted through PAYE system. You will not have to file any extra paper work for making it automated. However, this repayment will only be deducted in case you have started making more money than your threshold payment for the student loan. Therefore, if you are making lesser money than your student loan threshold, you do not have to worry about your student loan.
The PAYE system works like a charm. It has made things easier for employers as well as employees. They do not have to worry about filing separate paperwork for different taxes, as PAYE will accommodate most of the taxes at the payday.
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