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Pay As You Earn (PAYE) |
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Pay As You Earn is the way in which your income tax contributions are spread over
the financial year (i.e. April to April). Your employer deducts the amount of tax
from your weekly or monthly wage packet and gives it to the taxman.
The good news is that you don't pay tax on all your wages - everybody is entitled
to receive a certain sum each financial year without paying tax. As of the financial
year for 2005/2006 that figure is currently £4,895, which means you can earn that
much (which works out at around £408 a month) tax-free. Any earnings above this
amount are taxed at:
| up to £6,985 |
10% |
the standard rate |
| on earnings between £6,766 to £37,295 |
22% |
the basic rate |
| on any income over £37,296 |
40% |
the higher rate |
More taxation advice |
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