Pay As You Earn (PAYE) is the taxation system used by HM Revenue and Customs in order to directly collect Income Tax and National Insurance Contributions from employees’ payments and benefits on a regular basis. The Pay As You Earn system provides instruction how employers have to deduct tax and National Insurance Contributions from their employees’ pay and transfer it to HMRC. All deductions made under the Pay As You Earn system are held on an employee’s account to be set off against his liabilities resulting from Income Tax and Class 1 NICs.
Your obligations as an employer under PAYE scheme:
- To register with HM Revenue and Customs as an employer
- To establish if you have to apply the PAYE system
- To operate the PAYE system on the payments to your employees