What is HMRC? HM Revenue and Customs Explained
HMRC is the tax authority for the UK government and is also known as HM Revenue & Customs.
Some of the many important roles of HMRC includes collecting taxes, paying child benefits, overseeing tax and customs regulations, and ensuring that employers adhere to legal minimum wage requirements.
Established in 2005 and with it’s headquarters in London HMRC reports directly to the head of the Treasury the Chancellor of the Exchequer who has overall responsibility for HM Revenue & Customs.
The treasury establishes tax rates and explains updates and changes to tax policies through the annual Budget statement.
Understanding how HMRC affects your tax position is an essential way to keep your finances healthy and compliant with HMRC rules and regulations.
Our guide to HMRC covers many of the different taxes they manage and how to contact HMRC if you need them to help you with your tax position.
What tax does HMRC collect?
HMRC collects so many different taxes that at least one will touch your own financial situation in some way during your life.
We have covered below a number of the most common types of tax HMRC collects from both individuals and businesses in the UK:
Income Tax: Is the most famous tax HMRC collects. Income tax is applicable on all the taxable income you earn in the UK, including; wages, pension and rental income.
Paid through the pay as you earn and self assessment systems it is earmarked to pay for services we get from the government such as education and transport.
You can find out more about tax paid on income in our guide and if you are owed an income tax rebate.
VAT: This stands for Value Added Tax and is the tax sellers pay on most services and goods.
The standard rate for VAT is 20% of the cost of the item and this is passed on to the consumer in the price.
Charities, books, children’s clothes and some other goods and services do not pay VAT.
Businesses need to register for VAT if they meet the VAT threshold and other VAT registration requirements.
Stamp Duty Land Tax (SDLT): If you are purchasing a property in England or Northern Ireland, there is a possibility that you will need to make a payment for stamp duty land tax (SDLT).
If the price you pay for your primary residence is less than £250,000, you will not be required to pay any Stamp Duty.
Stamp duty is applicable to residential properties valued above £250,000, except for those who qualify for first time buyers’ relief.
Qualified first-time buyers will not incur stamp duty on properties priced up to £425,000 and will benefit from a reduced rate on purchases up to £625,000.
Depending on the value of the property stamp duty is paid at a rate of 5%, 10% or 12%.
Capital Gains Tax: If you sell anything worth over £6,000, including shares, insurance pay-outs or property, then you have to pay capital gains tax on any profit you make. This does not include your car or your home.
Corporation Tax: Limited companies and some other organisations have to pay corporation tax on any profits they make.
Inheritance Tax: If you are an executor for someone’s will then you are responsible for ensuring that Inheritance Tax is paid on the deceased’s estate.
‘Estate’ in this circumstance doesn’t just mean property and land, but also any money or possessions left by the person who has died. This tax only has to be paid on estates worth over a certain amount.
Air Passenger Duty:
Airlines are responsible for paying air passenger duty (APD) for each passenger departing from the UK.
The APD cost is typically included in the ticket price the amount varies based on the distance to your destination and the class of travel.
National Insurance:
Individuals contribute to national insurance to be eligible for specific benefits and the state pension.
Having a national insurance number (NINO) ensures that your national insurance contributions and tax are accurately recorded on your record.
Employers also have to pay national insurance contributions if they employees that earn over a particular level of income.
HMRC tax relief and tax allowances
HMRC administers and is responsible for granting tax relief and tax allowances.
Both tax relief and tax allowances exist to reduce the tax you owe and can result in a refund of tax already paid.
There are many tax reliefs and tax free allowances available which cover different types of tax for both employed individuals and businesses.
Finding out about what tax reliefs or tax allowances are available to you or your business is recommended so you can take advantage of the tax free income on offer.
Some reliefs and allowances are automatically given while others require a specific claims process to be followed.
Our guide to tax relief focuses on what relief you may be entitled to in a variety of different scenarios.
Personal allowances either work to directly reduce the amount of tax you pay on your income or act more of a credit that is set against your income to reduce tax payable.
Tax allowances encompass a broad range of tax situations and are a valuable tool you can legitimately use to minimise your tax bill.
Eight of the most common HMRC tax allowances are:
- Personal allowance for employed individuals.
- Personal savings allowance (PSA) if you have income from savings.
- Capital gains tax (CGT) allowance if you sell some assets.
- Dividend allowance if you have income from dividends.
- Inheritance tax (IHT) allowance if you inherit some assets.
- Marriage allowance if you are married or in a civil partnership.
- Trading allowance if you have self employed income.
- Property allowance if you have income from property.
What to do if you are owed a tax rebate from HMRC
HMRC has the responsibility to return any tax overpayments to the taxpayer.
They also need to work out and collect any tax underpayments.
If you think you have overpaid tax you should contact the correct HMRC department via their online portal, by phone or post.
The type of tax rebate you are owed will determine how you are paid and the process to reclaim your overpayment.
Not all tax rebates are returned automatically with HMRC putting the onus on individual taxpayers to reclaim what they are entitled to.
Our guides on how to claim an income tax rebate back from HMRC are a useful starting point and can help you make your claim in the best way.
HMRC and Pay as you Earn
PAYE or Paye as you Earn is the system used by HM Revenue and Customs (HMRC) to gather income tax and national insurance from employment.
The vast majority of workers who are not self employed pay income tax via PAYE which is operated by their employer or pension provider.
Employers typically have to run PAYE as part of their payroll and inform HMRC of employees earnings and deductions on or prior to each payday.
The tax collected by an employer (PAYE bill) on behalf of HMRC needs to be paid on a monthly basis.
As part of PAYE HMRC operates a tax coding system which tells employers and pension providers how much tax to deduct from employees pay.
HMRC national minimum wage
The national minimum wage is there to protect lower paid people employed under PAYE and represents the lowest legal salary an employer must pay to an employee.
For employees under PAYE the national minimum wage guarantees that you receive no less than the NMW.
HMRC enforces the national minimum wage and has the power to fine employers who do not comply with the NMW regulations.
The government determines the national minimum rates which are typically adjusted at the beginning of each new tax year.
HMRC tax rates and tax bands
Income tax rates and tax bands are used to calculate how much tax should be deducted from taxable income.
HMRC sets the tax rates that are put into tax bands which allow for the percentage of tax payable to be gradually increased as your income increases.
Depending on your level of income you could pay tax at more than one rate of tax. Understanding what tax bands your income falls into is vital so you can work out the percentage of tax that will be deducted from your income.
Tax bands and rates can be altered (with changes reported in the Chancellors budget statement) and are worth taking note of to allow for adjustments in your own future tax plans.
What is the HMRC contact number?
There are many different departments within HMRC meaning there can be a different HMRC telephone number depending on the department you need and the nature of your enquiry.
To alleviate pressure on their overworked staff and for the convenience of the public, HMRC now have many of their services online.
We have listed the contact information below for many of the most popular HMRC departments:
- HMRC general income tax (including PAYE tax rebate) enquiries:
HMRC phone number 0300 200 3300 and web address.
- HMRC tax credits enquiries:
HMRC tax credits phone number 0345 300 3900 and web address.
- HMRC child benefit enquiries:
HMRC child benefit phone number 0300 200 3100 and web address.
- HMRC national insurance enquiries:
HMRC national insurance phone number 0300 200 3500 and web address.
- HMRC VAT enquiries:
HMRC VAT phone number 0300 200 3700 and web address.
- HMRC all other enquiries:
HMRC provides a contact list of all other departments here.
HMRC online services
HMRC has introduced a number of online services which are great way to avoid lengthy phone ques especially if your enquiry is of a more standard nature.
Using the many online options saves time for everyone and is more convenient because you can access the tax information you want at a time that is best for you.
For example the HMRC personal tax account is specifically for individuals and gives access to a whole range of useable personal tax information like P60 details and your national insurance number (NINO).
HMRC’s online services give individuals and businesses a digital solution so they can self manage their tax affairs independently.
Some of the online services offered by HMRC include:
HMRC personal tax account
Individuals can open a personal tax account to view most of their personal tax details in one central location.
Using a personal tax account gives you constant online access to the information that many people call HMRC to request.
HMRC app
The HMRC app offers various tax services designed to make your personal information readily available all on your mobile phone.
It provides very similar information to the personal tax account and is downloadable for free from the Google Play and App stores.
Self Assessment
People who need to complete a self assessment tax return can open a self assessment record online which allows you to submit your return and view your self assessment facts and figures.
There is also a separate online self assessment option for partnerships and trusts.
Business tax account
The business tax account enables you to handle more than forty different business taxes through a single online platform.
Most business taxes, schemes, and duties can be included in your HMRC business tax account, providing simpler and more convenient access to your business’s tax related records.
Six taxes that you can activate in your business account are:
- Corporation Tax.
- Value added tax (VAT).
- Making Tax Digital for Income Tax (MTD for ITSA).
- PAYE for employers.
- Construction Industry Scheme (CIS).
- Gift aid.
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