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PAYE returns


The UK PAYE or pay-as-you-earn concept works on a scheme involving taxation. The process of PAYE returns is such that an amount of tax is deductible from one’s pay by the employer, before it is actually received. The deduction combines the income tax and the contribution in lieu of the National Insurance. It is a compulsory deduction and is derived at a fixed rate of percentage on the earnings. It allows the employee to enjoy certain services and benefits such as, National Health Services or NHS. A code is utilized to determine the amount to be withheld by application of the tax liabilities of an individual.

The level of earnings at which the tax becomes payable constitute the PAYE thresholds and it includes,

  • £453.00 monthly
  • £105.00 weekly


If you are employed at UK then a P60 form will be issued to you at the end of the financial year for which the tax is payable. In order to make a claim for the tax return, you need to keep all the documents ready to hand.

It is more or less mandatory for all the employers to file their Payee Returns


PAYE is applicable to which payments?


The payments on which PAYE is applicable include,

  • Wages and salary
  • Tips, shift pays and overtime
  • Commission and bonuses
  • Expense allowance payable in cash
  • Statutory Maternity, Paternity or Adoption Pay
  • Statutory Sick Pay
  • Compensation Payment and a lump sum payment
  • Vouchers. Premium bonds, shares and other non-cash items


What are the other deductions under PAYE?

The PAYE system can be used to deduct the other items and they include

  • Contributions towards employees pension
  • Repayment of loan paid to the employee
  • Repayment of student’s loan
  • Payment under an earning order attachment


What do Payment statements mean?

A pay statement or a pay slip needs to be given to an employee at the time of making payment to them or before that. It can be either in electronic or paper format. The items to be included in a pay statement are the gross payment before the deductions have been made, the deductions and the take home that is, amount payable after the deductions. An employee can place a complaint at an employment tribunal on not getting an itemized pay slip. A summary of the pay and the deductions should be provided to the employee at the end of the tax year in a P60 form.

How to start with the PAYE returns Procedure?

You must register yourself as an employer with HMRC. On registration, you will receive the New Employer’s pack. The pack consists of the CD –ROM, which comprises the essential forms, the electronic calculator and the other information in order to operate the PAYE. At present the Employer Annual Return needs to be filed at the end of the tax year using the P14 and P35 forms respectively. You should be a ‘PAYE Online for employers’ to the HMRC. As soon as you are registered as an employer you can be the registered PAYE Online.

What are the requisites for PAYE online?

Once you are registered as a PAYE online, you can submit as many forms possible. Nowadays almost every employer files the Employer Annual Return and for the employers with 50 or more employees filing the Annual return is somehow a mandatory. From April 2011, the requirement will extend to employers with less than 50 employees.




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