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How do I know if I should be paying tax?

To work out if you are a taxpayer follow these three steps:

If your taxable income is more than your tax-free allowances, you're a taxpayer and must contact HM Revenue & Customs (HMRC). If your tax-free allowances are the same as or more than your taxable income, no action is necessary. If you think that you shouldn't be paying tax but are, you'll be able to claim a refund.

Step one - add up your taxable income

Some income is taxable and some is never taxed. You compare only your taxable income with your tax-free allowances in a tax year (6 April to 5 April) to see if you are a taxpayer.

Taxable income

Your taxable income includes:

If you are married or in a civil partnership and have income from savings, investments or property held in joint names you're usually treated as getting half the income each. So you only have to pay tax on your half. If you're not married or in a civil partnership, you count only your share of joint income.

Non-taxable income

Income that's never taxed includes:

The HMRC website has a fuller list of taxable and non-taxable income.

• View a full list of taxable and non-taxable income (PDF document, 136K) (opens new window)

Step two – add up your tax-free allowances

Your tax-free allowances are the amount of income you can get without paying tax. They include the personal allowance and the blind person's allowance. 

Personal allowance

Everybody gets the basic personal allowance, but if you're 65 or over and your income is below certain levels the rate increases.

Note: If your income is over the 'income limit', the age related allowance reduces by half of the amount (£1 for every £2) you have over that limit, until the basic rate allowance is reached (You'll always get the basic allowance, whatever the level of your income.)

So if, for example, you're 66 and have an income of £22,300 (£500 over the limit) your age-related allowance of £9,030 would reduce by £250 to £8,780.

Blind person's allowance

If you're registered blind or are unable to perform any work for which eyesight is essential you can claim blind person's allowance. If you're married or in a civil partnership and can't use all your allowance, you can give the unused part to your spouse or civil partner.

The blind person's allowance for the tax year 2008-2009 is £1,800.

• More about blind person's allowance, including how to claim (opens new window)

Step three – work out if you're a taxpayer

Take your tax-free allowances away from your taxable income; if there's anything left you need to pay tax and must contact your Tax Office. (Bear in mind that even if you count as a taxpayer, you may qualify for other allowances that can reduce your tax bill, or in some cases mean you have nothing to pay – follow the link below to find out more).

If you get a private or company pension or do part-time work and as a result are a PAYE taxpayer, your Tax Office may be able to collect extra tax you owe that way (including on your State Pension). Otherwise they'll ask you to complete a form P810 or pay tax through Self Assessment.

• Allowances that can reduce your tax in retirement
• 'What is Self Assessment?'
• 'Do you need to fill in a tax return?'

How to contact your Tax Office

You'll usually find a phone number and address for your Tax Office in any letters or forms you've received from HMRC. Or, if you know the name of your Tax Office, you can search for the contact details online. You can also ask at a local HMRC Enquiry Centre.

• Contact details for all Tax Offices (opens new window)
• Find your nearest HMRC Enquiry Centre (opens new window)

If you think you're paying too much tax

If you think you're paying too much tax or shouldn't be paying tax at all, there are steps you can take to claim a refund.

• Reclaiming tax

More useful links

• Get tax-free savings interest on savings or claiming tax back
• Tax free saving or investing with ISAs
• Check the current tax rates and allowances (opens new window)
• Read about the new shorter Self Assessment tax return (opens new window)
• Pensioners and tax - information from HMRC (opens new window)
• How your pension income is taxed