What is a PAYE?
Pay as You Earn (PAYE) is the way most people in the UK pay Income Tax and National Insurance through their salary. Each time someone is paid, their employer takes the right deductions from their pay and sends the information to HMRC.
Employers report these details through Real Time Information (RTI), usually using payroll software, and make the payments due to HMRC.
When PAYE is run correctly, it helps keep tax records accurate and gives people confidence that the right amounts are being deducted.
Things to know
- PAYE applies to most employees paid through payroll in the UK
- Employers are responsible for deducting tax and National Insurance and paying it to HMRC
- PAYE information is reported through RTI submissions, such as FPS and EPS
- PAYE is separate from Self-Assessment, which is used for some other types of income
- PAYE rules and thresholds can change, so it’s important to keep up to date
FAQs
What does PAYE stand for?
PAYE stands for Pay as You Earn.
How does PAYE work?
An employer deducts tax and National Insurance from an employee’s pay and reports it to HMRC through payroll.
Is PAYE the same as Income Tax?
No. PAYE is the system used to collect Income Tax (and National Insurance) from pay.
Do self-employed people use PAYE?
Usually not. Self-employed people typically pay tax through Self-Assessment, though there are exceptions.
What happens if PAYE is reported incorrectly?
It can lead to errors in deductions and potential HMRC queries or penalties, so it’s important to correct issues quickly.
