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PAYE (short for “Pay As You Earn”) is a way of paying Income Tax and National Insurance through your salary if you’re an employee.
Your employer will do this automatically for you based on your tax code, then send the taxes over to HMRC.
If you are eligible for PAYE, your employer will use your P45 information (or New Starter Checklist if it’s your first job) to create a tax code. They will then take off the tax you owe from your wage and pay it to HMRC. You’ll receive a summary of these payments annually in your P60.
Until you earn over £12,570, you don’t pay any Income Tax – this is called the Personal Allowance.
When you earn over this amount, here’s how you’re taxed👇
PAYE doesn’t just deduct Income Tax and National insurance. Other things you might have to pay via PAYE are:
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