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PAYE

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What is PAYE?

PAYE, short for “Pay As You Earn,” is the system used in the UK to collect income tax and National Insurance contributions (NICs) directly from an employee’s wages or pension before they receive their take-home pay. Managed by HMRC (His Majesty's Revenue and Customs is a non-ministerial department of the UK government responsible for the collection of taxes), PAYE ensures that tax obligations are met automatically through payroll, reducing the need for individuals to file annual tax returns.

For pensioners, PAYE also applies to certain types of pension income. If a person receives a workplace or private pension, tax may be deducted at source using the PAYE system, similar to how it works for salaries. The amount deducted depends on the individual's tax code, which reflects their allowances and additional income. This system ensures that pensioners continue to pay the correct amount of tax without needing to make manual payments to HMRC.

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Sources

1

https://www.gov.uk/paye-for-em...