PAYE tax is one of the most frequently confused tax contributions both among employers and employees. It can cause anxiety, but it effectively only means that tax is being paid on behalf of the employee as it is earned, rather than at the end of the tax year, hence “Pay As You Earn”.
Despite the seeming simplicity of this concept there are a number of errors often made in its implementation and both employers and employees frequently have questions regarding the amounts paid, when and how they are paid and just how much is due at the end of the year. This is a basic guide to what PAYE is, and more importantly, how to avoid the most common problems.
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