National Insurance

PAYE tax and Class 1 National Insurance contributions

You normally operate PAYE as part of your payroll so HMRC can collect Income Tax and National Insurance from your employees.

Your payroll software will calculate how much tax and National Insurance to deduct from your employees’ pay.

Tax thresholds, rates and codes

The amount of Income Tax you deduct from your employees depends on their tax code and how much of their taxable income is above their Personal Allowance.

England and Northern Ireland

PAYE tax rates and thresholds 2020 to 2021
Employee personal allowance £240 per week
£1,042 per month
£12,500 per year
English and Northern Irish basic tax rate 20% on annual earnings above the PAYE tax threshold and up to £37,500
English and Northern Irish higher tax rate 40% on annual earnings from £37,501 to £150,000
English and Northern Irish additional tax rate 45% on annual earnings above £150,000