PAYE - the system

The legislation covering PAYE (Pay As You Earn) is frequently amended and added to by means of various statutory instruments.

The PAYE method of deducting income tax from salaries and wages applies to all income from offices or employments.  Hence, PAYE applies not only to weekly wages but also to monthly salaries, annual salaries, bonuses, commissions, directors fees, pensions and to other income from an office or employment.  PAYE also applies to certain payments not made in a cash form.

It is the employer's duty to deduct income tax from the pay of his employees, whether or not he has been directed to do so by the Inland Revenue.  If he fails to do this he may be required to pay over the tax which he should have deducted and, in addition, may be subject to penalties.  In certain instances a person other than the the employer is made responsible for operating PAYE.