PAYE system

In this lesson

1. 0:00 How the PAYE pay system works
2. 0:18 Understanding tax codes and allowances
3. 0:50 Employment income and self-assessment requirements
4. 1:04 Tax code adjustments and relief
5. 1:59 PAYE payment deadlines and thresholds
6. 2:36 Key payroll forms and submission dates
7. 3:34 Real Time Information and RTI penalties

About this lesson

You'll also understand real-time information requirements and HMRC penalties, all crucial knowledge for the Taxation paper in your ACCA or CIMA qualification. The PAYE system is designed to collect income tax and National Insurance at source through your employer, so in theory you won't need to complete a self-assessment tax return if employment is your only income. Your tax code is the key to this system—it tells your payroll department how much you can earn tax-free based on your personal allowance, any allowable expenses, and adjustments from prior years. Tax codes ending in L give you more relief, whilst those ending in K collect additional tax when you've received benefits or have an underpayment to recover. Employers face strict deadlines: those with 250 or more employees must submit PAYE records electronically by the 22nd of the month following each tax month (which runs from the 6th to the 5th). Real-time information must be submitted every time employees are paid, with a final submission after the tax year ends. Understanding these requirements and the associated penalties—from £100 to £400 per month depending on company size—is essential for your exam and your professional practice.

Duration: 5m