PAYE (Pay As You Earn)
Pay As You Earn(or PAYE for short) is the scheme whereby employees are paid by their company within the UK. PAYE is the official method the government use to collect national insurance and tax. Employers must have a Pay As You Earn scheme in place to make the necessary deductions from employee wages. It is an employer's duty to carry out the necessary PAYE deductions and contributions on behalf of the employee to HMRC. Pay As You Earn contributions will be deducted during each pay period and at the end of the relevant tax year a P60 form must be drawn up to show an employee what has been deducted from their wages in terms of PAYE contributions.
PAYE registration can be very relevant for new companies as directors are deemed to be employees of the company and therefore need to be registered and subjected to the Pay As You Earn scheme.
Pay As You Earn and Tax Codes
HM Revenue & Customs will supply the company with the relevant tax codes under which apply to each employee and these PAYE codes will be used to deduce how much income tax an employee will pay. The Pay As You Earn scheme means that an employee will be assigned a code in the form of a letter. Guidance on which letter might apply can be found on the HMRC website.
Due to the complex nature of Pay As You Earn registration and its management, many people choose to outsource their PAYE system. At The Company Warehouse we offer a simple Payroll Service which allows a company to do just that for a low cost. We also provide initial PAYE registration for a low cost. Please contact one of our helpful team for further details.
