Finance Guide

Paying tax in the UK can feel confusing at first, but the process becomes much easier when you understand whether your tax is handled automatically through PAYE or whether you need to report and pay HMRC directly.

Most employees in the UK have Income Tax and National Insurance taken from their wages automatically through PAYE. But if you are self-employed, have rental income, earn money from a side hustle, sell assets for a gain, receive untaxed income, or get a letter from HMRC, you may need to deal with tax yourself.

Think about it:
If your employer already deducts tax from your payslip, you may not need to pay HMRC directly. But if you earn extra income outside your job, HMRC may not know the full picture unless you tell them.

Official UK tax links you may need

Useful GOV.UK links:
Check if you need to send a Self Assessment tax return
Register for Self Assessment
File your Self Assessment tax return online
Pay your Self Assessment tax bill
Sign in to your Personal Tax Account
Get help if you cannot pay your tax bill on time

What you will learn

• How UK tax is usually paid
• The difference between PAYE and Self Assessment
• Who may need to send a tax return
• How to check if you need to tell HMRC
• How to register for Self Assessment
• How to file your tax return online
• How to pay your tax bill
• What to do if you cannot pay on time
• Common mistakes to avoid

Important:
This guide is educational only and is not personal tax advice. Tax rules can change, and your situation may be different. Always check the official GOV.UK links or speak to a qualified tax adviser if you are unsure.

Step 1: Understand how you normally pay tax

In the UK, many people pay tax automatically. If you are employed, your employer usually deducts Income Tax and National Insurance from your wages before you receive your pay. This system is called PAYE, which stands for Pay As You Earn.

If all your income is from employment and your tax code is correct, you may not need to do anything else. But if you have extra income that is not taxed automatically, you may need to report it to HMRC.

PAYE:
Tax is usually taken automatically from wages, salary, pension income, or some benefits before the money reaches you.

Self Assessment:
You tell HMRC about your income, expenses, and tax position by sending a tax return, then pay any tax you owe.

Step 2: Check if you need to send a tax return

Before worrying about how to pay tax, first check whether you actually need to send a Self Assessment tax return. Not everyone does.

You may need to send a tax return if you were self-employed as a sole trader and earned more than £1,000 before expenses, were a partner in a business partnership, had Capital Gains Tax to pay, had certain untaxed income, or had other tax charges to deal with.

Do this first:
Use the official GOV.UK tool here: Check if you need to send a Self Assessment tax return. This is the safest starting point because it helps you avoid guessing.

• Self-employment income
• Side hustle or freelance income
• Rental income
• Savings, investment, or dividend income
• Foreign income
• Capital gains from selling certain assets
• High Income Child Benefit Charge
• A letter from HMRC telling you to send a return

Step 3: Know the UK tax year

The UK tax year usually runs from 6 April to 5 April the following year. That means your tax return normally covers income received during that tax year, not the calendar year from January to December.

Simple example:
The 2025 to 2026 tax year runs from 6 April 2025 to 5 April 2026. Income earned during that period belongs to that tax year.

Key idea:
Before filing a tax return, always make sure you are looking at the correct tax year.

Step 4: Register for Self Assessment if needed

If you need to send a tax return and have not done one before, you normally need to register for Self Assessment. After registering, HMRC will give you access to file your return online.

You may receive a Unique Taxpayer Reference, often called a UTR. This is an important tax reference connected to your Self Assessment account.

Official link:
Register or check how to register here: Register for Self Assessment on GOV.UK.

Do not leave this too late:
If you register late, your tax return may be delayed and you could still need to pay your bill by the deadline.

Step 5: Gather your records before you start

Before filling in your tax return, collect the information you need. This makes the process much easier and reduces the chance of mistakes.

• Your National Insurance number
• Your UTR if you already have one
• Your Government Gateway sign-in details
• Employment income details such as P60 or P45
• Self-employment income records
• Invoices and business income records
• Allowable business expenses
• Bank interest and savings income
• Dividend or investment income
• Rental income and property expenses
• Pension contributions or Gift Aid details
• Student loan information if relevant
• Records of any capital gains

Key idea:
Good records make tax easier. If your income and expenses are organised, filing your return becomes much less stressful.

Step 6: File your Self Assessment tax return online

Once you are registered and have your records ready, you can file your Self Assessment tax return online. The online service asks for details about your income, expenses, tax reliefs, and any tax already paid.

You do not need to wait until the deadline to file. Sending your return earlier can help you find out what you owe and give you more time to budget.

Official link:
Use GOV.UK to file online: File your Self Assessment tax return online.

Check your understanding:
Do you pay the tax first or file the return first?

Answer: Usually you file your return so HMRC can calculate what you owe, then you pay the tax bill by the deadline.

Step 7: Understand the main tax deadlines

Self Assessment has important deadlines. Missing them can lead to penalties and interest, so it is worth putting reminders in your calendar.

• 5 October: deadline to tell HMRC you need to complete a tax return for the previous tax year if you have not sent one before or need to reactivate Self Assessment
• 31 October: paper tax return deadline
• 31 January: online tax return deadline and main payment deadline
• 31 July: second payment on account deadline if payments on account apply

Important:
Always check the current deadline on GOV.UK because dates can vary depending on your situation. Start here: Self Assessment deadlines.

Step 8: Pay your Self Assessment tax bill

After filing your return, HMRC will show what you owe. You can then pay your Self Assessment tax bill using one of HMRC’s accepted payment methods.

GOV.UK lists payment options including approving a payment through your online bank account, online or telephone banking, CHAPS, debit card or corporate credit card, Direct Debit, Bacs, cheque, or paying through your tax code if eligible.

Official link:
Pay your Self Assessment tax bill here: Pay your Self Assessment tax bill on GOV.UK.

Be careful:
Use only official GOV.UK or HMRC links when paying tax. Do not pay through random links in texts, emails, social media messages, or adverts.

Step 9: Know your payment reference

When paying Self Assessment, you normally need the correct payment reference so HMRC can match the payment to your account.

For Self Assessment Direct Debit payments, GOV.UK explains that the reference is usually your 10-digit UTR followed by the letter K. For Simple Assessment, HMRC letters usually include a 14-character reference starting with X.

Key idea:
The correct reference matters. If you use the wrong reference, HMRC may not allocate the payment correctly.

Step 10: What are payments on account?

Payments on account are advance payments towards your next Self Assessment tax bill. They can surprise beginners because they may make the amount due feel higher than expected.

If payments on account apply to you, there is usually one payment deadline on 31 January and another on 31 July. These payments are based on your tax bill and are designed to spread tax payments across the year.

Simple example:
You might pay your balancing payment for the tax year that has ended, plus a first payment on account towards the next year. Then a second payment on account may be due by 31 July.

Beginner warning:
Payments on account can catch people off guard. Do not assume the first number you see is only for last year’s tax.

Step 11: Use your Personal Tax Account

Your Personal Tax Account lets you check and manage HMRC records. You can use it to check Income Tax, view or manage Self Assessment, claim refunds, check your National Insurance number, find your UTR if you already have one, and more.

Official link:
Sign in or set it up here: Personal Tax Account on GOV.UK.

Think about it:
If you can see your tax records, payments, references, and HMRC details in one place, it becomes much easier to stay organised.

Step 12: What if you cannot pay your tax bill?

If you cannot pay your tax bill in full, do not ignore it. HMRC may allow some people to set up a payment plan, sometimes called a Time to Pay arrangement.

HMRC will usually check whether the payment plan is affordable. You may need details of your income, spending, bank account, and the tax reference for the bill you cannot pay.

Official link:
Start here if you are struggling: Get help if you cannot pay your tax bill on time.

The worst thing to do is ignore the bill. If you cannot pay, contact HMRC or use the official GOV.UK payment support pages as early as possible.

Step 13: Simple Assessment tax bills

Not everyone who owes tax uses Self Assessment. Some people receive a Simple Assessment letter from HMRC. This can happen when HMRC calculates that you owe Income Tax that cannot be collected automatically.

If you receive a Simple Assessment letter, follow the instructions on the letter and use the official GOV.UK Simple Assessment pages.

Official link:
Pay a Simple Assessment bill here: Simple Assessment on GOV.UK.

Common mistakes to avoid

• Assuming PAYE covers all extra income
• Waiting until January to start your return
• Not registering for Self Assessment early enough
• Using the wrong payment reference
• Ignoring payments on account
• Forgetting about side hustle or rental income
• Not keeping records of income and expenses
• Clicking unofficial tax payment links
• Missing the payment deadline even after filing the return
• Ignoring HMRC letters because they feel stressful

Common mistake:
Filing your tax return and paying your tax bill are not the same thing. You need to do both if tax is due.

A simple UK tax checklist

• Check if you need to send a Self Assessment tax return
• Register for Self Assessment if needed
• Set up or access your Government Gateway account
• Gather income and expense records
• File your tax return online
• Review how much tax HMRC says you owe
• Check if payments on account apply
• Pay using the official GOV.UK payment page
• Use the correct payment reference
• Check your payment has been received
• Get help early if you cannot pay

Beginner takeaway:
UK tax becomes much easier when you treat it as a process: check, register, record, file, pay, and keep proof.

Quick recap

• Many employees pay tax automatically through PAYE
• You may need Self Assessment if you have untaxed income or certain tax charges
• Use GOV.UK to check whether you need to send a tax return
• Register early if Self Assessment applies
• File your return before the deadline
• Pay your tax bill through official HMRC/GOV.UK routes
• Use the correct reference so HMRC can match your payment
• Contact HMRC early if you cannot pay on time

Mini quiz

Question 1:
If you are employed and your employer deducts tax through payroll, what system is usually being used?

Answer: PAYE, which stands for Pay As You Earn.

Question 2:
What should you use first if you are unsure whether you need a tax return?

Answer: The official GOV.UK tool to check if you need to send a Self Assessment tax return.

Question 3:
Is filing a tax return the same as paying your tax bill?

Answer: No. Filing tells HMRC your tax position. Paying clears the amount you owe.

Question 4:
What should you do if you cannot pay your tax bill in full?

Answer: Do not ignore it. Use GOV.UK/HMRC support pages to check whether a payment plan may be available.

Final thoughts

Paying your taxes in the UK does not need to feel mysterious. The key is knowing whether your tax is handled automatically through PAYE or whether you need to report and pay HMRC directly.

The safest approach is simple: use official GOV.UK tools, keep good records, file early, pay through official HMRC routes, and ask for help before the deadline if you are struggling.

If you build the habit of checking your tax position early, keeping records throughout the year, and using the correct official links, tax becomes much easier to manage and far less stressful.