Do I need to pay PAYE tax if I’m self-employed?
No, PAYE is for workers who are employed. If you are classed as self-employed then your tax contributions will be calculated and paid via the Self-Assessment process.
PAYE and pensions
As well as collecting income tax contribtions, PAYE is also used to collect tax from people who receive pension income.
If you owe tax on any income you get when retired, then this will be taken by your pension provider (e.g. the annuity firm or pension scheme) and paid directly to HMRC – with you receiving the remainder net of any tax deducted.
This doesn’t apply to your state pension though, which is paid gross i.e. no tax is deducted from it. However, this does count against your tax-free personal allowance and will affect how much private pension income you can get before tax.
Can I still be due a tax refund if I’m on PAYE?
Yes, there are many reasons why a PAYE employee may be eligible to make a tax refund claim.
A lot of employees simply assume that their tax must be correct if it is going through the PAYE system, so they don’t take the time to check it. As a result there is a lot of workers out there missing out on money that is rightfully theirs.
For example, if you travel to any temporary workplaces as part of your job (e.g. different building sites) then you will probably be paying out for fuel or public transport, as well as food and maybe sometimes even accommodation costs – all of which can be included as part of a tax rebate claim…