What is tax?
Tax is money that individual people and businesses are legally required to pay to the government. It helps to pay for (or fund) public services and other things we all rely on.
You pay tax in a number of ways, like when you earn money or when you buy things, and most of the time it happens automatically.
For Value Added Tax (VAT), it’s usually included in the price of the things you buy or services you pay for. If you’re employed, Income Tax is usually taken off your wages through the ‘Pay As You Earn’ (PAYE) system. And some businesses and people pay tax to us directly when they send us a tax return.
What does tax pay for?
Tax is how the government pays to make the services we need work properly. When you pay tax, you’re helping to fund things like:
Health
Tax helps pay for the NHS, including hospitals, doctors, nurses and medicine.
Education
Tax pays for schools, teachers and college places.
Public safety
Tax helps pay for the police, fire service and the courts.
Transport
Tax helps look after roads, buses, trains and other transport.
Support for people and families
Some people need extra help, so tax helps pay for benefits and support payments.
Local services
Tax helps with things like parks, bins and looking after the environment.
Without tax, these shared services simply wouldn’t work.
You can find out more about the most common types of tax on this page.
How is tax collected?
There are a number of different ways we collect tax. If you’re employed, we’ll try to take it through your wages through the PAYE system we mentioned earlier. If we can’t collect the tax you owe this way, we may send you a Simple Assessment letter or ask you to fill out a tax return.
Take a look around our section on tax collection to find out more.
Who are HMRC?
In the UK, most tax is collected and managed by us, ‘His Majesty’s Revenue and Customs’ or HMRC for short. We offer guidance and support to help make sure everyone pays what they’re supposed to.
As well as making sure the right tax is paid at the right time, we also give vital financial support to people who need it most. We do this through our benefits and credit systems, like Child Benefit for families.
Becoming tax confident
Almost everyone will pay tax at some point in their lives – often starting from their first job. You might see it on your payslip or on a receipt when you buy something. When you do see it, it means that you’re helping your community and country to keep working well.
Most people will find that their tax situation changes throughout their life. This might happen when you start work, switch jobs, study, rent, save or start earning money in new ways. You don’t need to be a tax expert but understanding the basics can help you feel more confident and in control of your money.
We’re here to fill in any gaps in your knowledge. Whether you need help understanding your tax, managing payments or getting extra support like Child Benefit.
As you become more confident, you’ll find it easier to manage your own tax online. Why not download our HMRC app or take a look at our online services on GOV.UK.