Pay As You Earn (PAYE)
The PAYE system is the way that HM Revenue & Customs can collect the regular (normally weekly/monthly) deductions of tax and national insurance from employees. This does not cover most benefits in kind which are taxed separately (usually by a restriction in the tax code).
What is PAYE applied to?
PAYE is applied to payments such as:
- Salary and wages
- Bonuses and commission
- Overtime, shift pay etc.
- Tips and gratuities
- Statutory sick pay
- Statutory maternity pay
- Round sum expense allowances
- Amounts reimbursed to settle personal bills
- Lump sum and compensation payments (unless the payment is tax free).
PAYE is also applied to earnings not paid in cash (e.g. cash vouchers, premium bonds, gold, metals, shares etc).
What deductions can tax relief be claimed on?
Tax relief can be claimed on payments made into an employer's retirement benefit scheme, pension scheme or deductions made under the payroll giving scheme (GAYE).
Notices of coding
A notice of coding consists of any allowances you are entitled to (eg personal allowance and married couple's allowance) together with any deductions (eg car benefit, underpayment of tax from a previous year). The net coding will be applied to any remuneration taxable under PAYE.
The coding is used to collect underpayments from previous years and tax due on benefits in kind.
This page was last reviewed on 03 April 2006. The information may not reflect changes in legislation made after this date.
This is only a guide to your tax position and should not be relied on in place of professional accounting or tax advice. Any calculated figures are illustrative and are based on the data you provided.
