Pay As You Earn (PAYE) is a system of collection of tax from salaries, wages, pensions etc.

A person within PAYE for a tax year will not necessarily be required to file a self-assessment tax return but may, by written notice, require HMRC to send him such a return for completion and filing.

PAYE income (i.e. income potentially within the scope of PAYE) embraces taxable earnings from an employment, 'taxable specific income' from an employment, most taxable pension income and taxable social security income. Not all PAYE income is subject to deduction of tax under PAYE but all payments of such income are subject to such deduction.

All persons making payments of PAYE income are required to deduct the appropriate amount of tax from each payment (or repay over-deductions) by reference to PAYE Tax Tables, which are so constructed that, as near as may be, tax deducted from payments to date from the previous 5 April corresponds with the correct time proportion to date of the net total tax liability (after allowances and reliefs) of the recipient on that income for the year. The 'total tax' may include adjustments for any previous year and it 'may be assumed' that payments to date bear the same proportion to the total emoluments as that part of the year bears to the whole. Employers are also required to deduct National Insurance contributions at the same time as PAYE tax is deducted.

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