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Pay As You Earn

Updating author: Vince Ashall


  • Employers are required to deduct tax and national insurance contributions (NICs) where they operate a PAYE scheme for one or more employees. (See The PAYE system)
  • Employers must send the money they collect, along with their own NICs, to Banking Operations (the Accounts Office) within 14 days after the end of every tax month or within 17 days if paying electronically. For "large employers" there is a mandatory requirement to pay electronically within the same time limit of 17 days from the end of the tax month. (See Payment of tax and national insurance)
  • Employers may be able to claim the employment allowance to offset against their Class 1 national insurance contributions. (See Employment allowance)
  • Some employers must pay the apprenticeship levy via the PAYE system. (See Apprenticeship levy)
  • Leavers should be provided with a P45 showing their total tax and pay figures to date. Employers should include details of leavers on their full payment submission. New employees should provide Parts 2 and 3 of their P45, as filled in by their previous employer. (See Leavers and new employees)
  • All employees in employment on 5 April should be given a form P60 at the end of the tax year, showing their tax and NICs and various other details. This can either be in paper or electronic format. (See The end of the tax year)
  • Real time information is the normal method of reporting deductions and requires employers to report deductions prior to, or at the time of, paying staff. (See Real time information)
  • Employees may be entitled to child tax credit or working tax credit paid direct to claimants by HM Revenue and Customs. (See Tax credits)
  • Employees can make donations before taxable pay is calculated to their nominated charities through the Payroll Giving Scheme. The donations attract only tax relief via PAYE and not relief from NICs. (See Payroll giving)

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