All UK residents and people with a UK income are potentially liable to UK Income Tax.

Income Tax on employment income in the UK is collected through a system known as Pay As You Earn or PAYE. The responsibility for deducting the tax from employees' salaries or wages lies with the employer. The employer deducts the tax from employees' wages and then pays it over to the tax authorities during the following month.

Tables and booklets are issued by the Inland Revenue to employers to enable the correct amounts to be deducted. It is also possible to buy computer software to calculate the deductions.

Many employers sub-contract this work to payroll bureaus who carry out the calculations for them. Many of our clients ask us to do the calculations. In this case, having been told the amount of the gross pay, we calculate the deductions and provide payslips showing the amounts of deductions and the net amount payable to the employee. We then calculate the amount payable to the Inland Revenue by the company.

The other employee taxes involved are National Insurance Contributions. Again, the tax authorities provide tables and booklets for the calculation of these. However, a payroll computer program is often used for their calculation. If we are providing payroll services then we will include this calculation in our service.

© Majors, Chartered Accountants, 2001;  Updated 28 April 2001;  Reviewed 25 April 2002