Tx notes fa22 Final

9.1. Pay As You Earn 
The purpose of the PAYE system is to deduct the correct amount of income tax and National 
Insurance Contributions over the year.
9.2. Employers’ duties 
The employer has a duty to: 
(a)
deduct income tax from the pay of his employees
(b)
calculate the amount of NIC that should be deducted
(c)
keep a record of each employee’s pay and deduction 
(d)
Employers must send income tax and NIC information to HMRC electronically every time 
employees are paid (weekly or monthly) and make their monthly PAYE payments electronically 
on the 22nd of the month under the Real Time Information reporting system.
(e)
There are penalties if submissions made during the tax year are made late, though there is no 
penalty for the first month in a tax year that submissions are paid late. Thereafter a monthly late 
filing penalty of between £100 and £400 is charged depending on the number of employees. 
An additional penalty of 5% of the tax and NIC due may be charged where the submission is 
more than 3 months late.
(f)
send appropriate returns in addition to the to the employee when required.
9.3. Application of PAYE 
The following count as pay: 
(a)
salaries, wages, overtime, bonuses
(b)
pensions
(c)
It is now possible for an employer to choose to include most taxable benefits within their 
normal payroll, with the employee’s income tax liability being collected under PAYE. What are 
now referred to as “Payrolled” benefits do not now have to be reported on form P11D., a form 
submitted by the employer that lists the benefits provided to an employee in a tax year
(d)
If taxable benefits are not payrolled, then they continue to be reported on form P11D. Income 
tax will then normally be collected by an adjustment to the employee’s PAYE tax code.

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