Pay As You Earn (PAYE) is HMRC’s system to collect income tax (which helps pay for services like education and healthcare), and National Insurance (which helps pay for some benefits and the State Pension) from employees. On this page we tell you more about how PAYE tax and National Insurance deductions work.
When must an employee be on PAYE?
Check you need to pay someone through PAYE. You usually have to pay your employees through PAYE if they earn £120 or more a week (£520 a month or £6,240 a year). You do not need to pay self-employed workers through PAYE .
Do all employees have to be on PAYE?
As an employer, you normally have to operate PAYE as part of your payroll. You do not need to register for PAYE if none of your employees are paid £120 or more a week, get expenses and benefits, have another job or get a pension. However, you must keep payroll records.
How much PAYE do employers pay?
Employers pay Class 1 NICs of 13.8% on all earnings above the secondary threshold for almost all employees. This rate has remained the same for several years.
PAYE is the abbreviated term for ‘pay as you earn’ and refers to the amount of income tax that is deducted from your salary before you receive it. PAYE was first introduced in 1944. All PAYE is sent directly to HMRC by your employer before it even reaches your account, so it is never actually in your possession.
How long does an employer have to keep PAYE records?
3 years
Your records must show you’ve reported accurately, and you need to keep them for 3 years from the end of the tax year they relate to. HMRC may check your records to make sure you’re paying the right amount of tax.
Can a person be paid through PAYE if they are self employed?
Individuals and their employers may have to pay unpaid tax and penalties, or lose entitlement to benefits, if their employment status is wrong. Someone is probably self-employed and shouldn’t be paid through PAYE if most of the following are true:
When do you ceasing an employee on payroll?
Ceasing an employee when you are not due to make a payroll submission. You may have an employee who no longer works with you but is still registered with you on Revenue records. To cease this employee, you should make a nil payroll submission and include a date of leaving.
When is a worker not entitled to a notice period?
Workers usually aren’t entitled to: minimum notice periods if their employment will be ending, for example if an employer is dismissing them the business doesn’t have to offer them work and they don’t have to accept it – they only work when they want to
What happens if you are self employed in the UK?
Employment law doesn’t cover self-employed people in most cases because they are their own boss. However, if a person is self-employed: they still have protection for their health and safety and, in some cases, protection against discrimination.
