Employment Tax Compliance

In the United Kingdom, employed individuals receiving a salary or wages are required to pay income tax on their earnings. The amount of tax an individual must pay depends on their income and the tax band in which they fall.

In the England and Wales, there are four tax bands:

1. Basic rate: 20% on income up to £50,000
2. Higher rate: 40% on income between £50,001 and £150,000
3. Additional rate: 45% on income over £150,000

In addition to income tax, individuals employed in the England and Wales are also required to pay National Insurance contributions. National Insurance contributions are a tax used to fund the country’s social security system, including benefits such as the state pension. For Scotland there are different rates of Income tax.

Employees are required to pay National Insurance contributions at two different rates:

1. A standard rate of 12% on earnings between £184 and £967 per week (2022-2023 tax year).
2. A higher rate of 2% on earnings over £967 per week (2022-2023 tax year).

It’s important to note that the tax rates and thresholds provided here are current for the 2022-2023 tax year and are subject to change in future tax years. Therefore, it’s always a good idea to check the most up-to-date tax rates and thresholds to ensure that you pay the correct amount of tax.

If your employer is deducting more tax from your pay than you believe you should be paying, there are a few potential explanations for this. One possibility is that your employer is using an incorrect tax code. If your tax code is incorrect, it could result in too much tax being deducted from your paycheck.

Another possibility is that you have received additional income from another source, such as a second job or rental income. If you have received additional income that is not being taxed at source, it is your responsibility to declare this income to HM Revenue and Customs (HMRC) so that it can be included in your tax calculations. If you fail to do so, HMRC may collect outstanding tax through your tax code.

If you believe your employer is deducting too much tax from your pay, you should contact HMRC to discuss your situation. They will review your tax records and determine whether you are paying the correct amount of tax. If it is established that your employer has deducted additional tax, you may be entitled to a tax refund. To claim a tax refund, you will either need to complete a tax return and submit it to HMRC, or the refund will be adjusted in your tax code. If you leave the job, HMRC can send you a cheque for your refund. You can find more information on how to claim a tax refund on the HMRC website.

Getting a refund of National Insurance (NI) contributions is possible under certain circumstances. Some reasons you may be eligible for a refund include the following:

• You have paid too much National Insurance because of an error or overpayment
• You have reached state pension age and are no longer required to pay National Insurance
• You have left the UK and are no longer required to pay National Insurance
• You have received certain benefits or credits that have reduced your National Insurance liability

If you believe you are eligible for a National Insurance refund, you can apply through the government’s website or by contacting the National Insurance Contributions Office. Keeping records of your National Insurance contributions is advisable, as you may need to provide evidence of your payments to claim a refund. 

It is important to note that you can only claim a refund of National Insurance contributions within a specific time frame. For example, you can claim a refund of voluntary contributions within six years of the end of the tax year to which you contributed. 

Whether you need to file a tax return for your employment depends on many factors, including how much you earn and what type of work you do.

In general, you will need to file a tax return if:

1. You are self-employed, and your net profit (total income minus allowable expenses) is more than £1,000 per year.
2. You are an employee with an income of more than £100,000.
3. You have to claim for expenses more than £2,500.00
4. You are an employee and received more than £1,000 in untaxed income, such as tips or commission, which is not adjusted in your tax code.
5. You received income from renting out a property.
6. You received income from savings or investments of more than £10,000.
7. You received dividends of more than £2,000.
8. You received a foreign pension.
9. You are a company director.
10. You are a trustee of a trust or registered pension scheme.

If you are unsure whether you need to file a tax return, you can use the online information on the HM Revenue and Customs (HMRC) website to check.  

If your employer fails to pay taxes to HM Revenue and Customs (HMRC), it is important to understand that you are not personally responsible for paying these taxes. As an employee, you are required to pay tax on your earnings through the PAYE (Pay As You Earn) system. Under this system, your employer is responsible for deducting the appropriate amount of tax from your pay and submitting it to HMRC on your behalf.

If your employer fails to pay the tax that they have deducted from your pay to HMRC, they may face penalties and interest charges from the tax authorities. Sometimes, the employer may also be required to pay unpaid taxes and interest charges out of their funds. If you are concerned that your employer needs to pay the correct amount of tax to HMRC, you should contact HMRC for advice. HMRC has a number of mechanisms in place to ensure that employers meet their tax obligations, and they can help you resolve any issues.

It is important to note that you have certain rights and protections under UK employment law as an employee. For example, if you are concerned about your employer’s failure to pay tax or any other issue related to your employment, you may seek advice from an employment law specialist or a trade union representative.

If you are paid below the minimum wage, you have every right to ask your employer to pay you the difference between the amount you have been paid and the minimum wage. The minimum wage is the standard hourly wage employers must legally pay their workers. If you are paid below the minimum wage, you should resolve the issue with your employer. You may inform your employer to see if you can reach an agreement. If this is unsuccessful, you can make an online complaint to HM Revenue and Customs (HMRC), which is responsible for enforcing the minimum wage.

To complain to HMRC, you must provide your employment details, including your job title, hours worked, and the pay you received. In addition, you will need to provide proof of age and payment confirmation, such as payslips or bank statements. If your complaint is upheld, HMRC will require your employer to pay you the difference between the amount you were paid and the minimum wage and any arrears of pay you are owed. HMRC may also impose a fine on your employer for failing to pay the minimum wage.

It would be best if you made a complaint as soon as you realised that you were paid below the minimum wage. If you cannot make a complaint within a time frame, you may still be able to seek compensation through an employment tribunal.