PAYE

PAYE (Pay As You Earn) is HMRC's system for collecting Income Tax and National Insurance from most employees as they are paid, rather than through a later return. Employers operate PAYE as part of running payroll, deducting tax and National Insurance from salary or wages, as well as from tips, bonuses, and statutory sick or maternity pay, before the employee receives it.

Employers must register for PAYE where an employee is paid £96 or more a week, gets expenses or company benefits, is drawing a pension, or has had another job, and must report employees' payments and deductions to HMRC on or before each payday. Payroll software works out how much tax and National Insurance is owed — including the employer's own National Insurance contribution — which is then paid over to HMRC, usually every month.