PAYE – or ‘pay as you earn tax’ – is a UK-wide system that allows employers to deduct tax on income payments to their employees on a weekly or monthly basis. These tax deductions are treated as advance payments of the income tax that is expected to be due by the end of the tax year (5 April).

If too much tax has been collected over the course of the year, HMRC will issue a refund to the employee – via the employer – after the tax year has completed. Similarly, if too little tax has been paid, this will need to be corrected. HMRC often allows these payments to be taken from the
following tax year’s PAYE income, by issuing the employer with a new PAYE code to reflect the new tax repayment requirements.

As the employer, it is your responsibility to keep track of your PAYE payments and to forward the correct payment amount to the tax office.

How is PAYE paid to HMRC?

You can choose to either pay your PAYE bill to HMRC monthly, or quarterly.

If you are paying monthly, you must ensure that full payment of your PAYE bill has been made to HMRC by the 22nd day of the next tax month.
If you are paying quarterly, you must pay you PAYE bill by the 22nd day of the month that follows the end of that particular quarter. For example, the first quarter of the financial year runs from 6 April until 5 July. This means that you need to process and pay your PAYE bill for the first quarter by 22

These payments can be made via your accountant, or directly via CHAPS or online or telephone banking.

However, if you are paying by cheque, you must ensure that the cheque has been made out, signed, dated and placed in the post before the 19th day of the month that follows the month of taxation.

For quarterly payments, the cheque must be sent by the 19th day of the month that follows the month of taxation. So, your PAYE bill for the first quarter of the year (6 April – 5 July) should be posted by 19 July.

If your payment is late, you may incur a fine or penalty from the tax office. It is therefore important to account for any possible delays that might affect the processing of your payment. For instance, if the 22nd day falls on a bank holiday, then you must ensure that the PAYE bill is paid by the previous working day.

Bear in mind that new direct debits can take five working days to begin, while some bank transfers and debit card payments can take up to three working days to process.

Find out more

If you want to learn more about when and how PAYE needs to be paid to HMRC, our team at Practical Software are here to help. With many years’ payroll experience, we work with you to provide the bespoke care that your business deserves.

You can view our full list of services from here.

Or, if you have any additional questions or queries, please do not hesitate to get in touch directly and let us know exactly what you need.