Definition of pay as you earn PAYE

Pay as you earn (PAYE) is the system that HM Revenue & Customs (HMRC) uses to collect income tax and national insurance contributions (NICs) from employees’ pay. The employer deducts income tax and NICs from employees’ pay each pay period (which could be monthly, fortnightly or weekly) and pays employers’ Class 1 NICs if they earn above a certain threshold. Employers pay these amounts to HMRC monthly or quarterly.

The Government has implemented the biggest change to PAYE since its introduction in 1944. This change, known as ‘real time information’ requires employers to provide HMRC with details of payments made to employees together the tax and national insurance contributions deducted when or before the payments are made to the employee. See real time information for more details. [1]

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