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PAYE As you Earn (PAYE) is an tax paid on income, PAYE is therefore an income tax. PAYE is calculated based on your earnings throughout the year.

PAYE is deducted at each payment cycle, if you are paid monthly then PAYE will be calculated on that month and paid monthly. If you are paid weekly then PAYE will be calculated for that weeks earning and be deducted weekly.

PAYE, along with National Insurance Contributions (NIC) are paid directly to Her Majesties Revenue and Customs (HMRC). Your employer has to send PAYE information to HMRC electronically every time they make a payroll transaction for you and your colleagues.

THE PAYE information is sent along with other taxable deductions, NIC calculations, Employers NIC calculations etc so HMRC have a full record of your earning in near real time.

- Salary and wages
- Overtime, shift pay and tips
- Bonuses and commission
- Certain expenses allowances paid in cash
- Statutory Sick Pay
- Statutory Maternity, Paternity or Adoption Pay
- Lump sum and compensation payments - such as redundancy payments - unless they're exempt from tax
- Non-cash items such as vouchers, shares or premium bonds

As you can see, PAYE is pretty much payable on everything you earn.

PAYE is a multi tier tax where the amount you pay depends on the amount you earn. In simple terms, the more you earn, the greater a percentage of tax the government takes.

Each year, the UK government alters the earnings thresholds. The earning threshold determines at what stage you will start to pay a certain percentage of your earning as PAYE.