The Pay As You Earn (PAYE) system is the HM Revenue and Customs (HMRC) way of collecting income tax and national insurance from employment. You would have to manage PAYE as part of your payroll as an employer.
For the Employer
Companies don’t need to register for PAYE if:
- employees are paid less than £123 per week;
- employees do not get expenses and benefits; or
- employees have another job or get a pension.
- You must register an employee with Payee before the first payday. Getting your employer PAYE reference number can take up to 5 working days. You cannot register more than two months before you start paying people.
You still need to keep payroll records even if you don’t register for PAYE.
When paying payroll, make deductions for PAYE:
- Deduct tax and National Insurance
- Report payments and deductions to HMRC
When paying HMRC:
- If you run payroll yourself, you will need to report your employees’ payments and deductions to HMRC on or before each payday.
- You have to pay HMRC every month unless you expect to pay less than £1,500 a month; you can arrange to pay quarterly.
For the Employee
- Income tax is deducted from your salary or pension before you receive it.
- Most employees pay income tax in this way. Rather than making a payment to HMRC, the correct amount is deducted from your salary before you are paid and sent to HMRC by your employer.