What is PAYE on my Payslip?

PAYE is an abbreviation for Pay-As-You-Earn. It is a system of paying income tax and National Insurance Contributions. Your employer deducts tax and NI from your wages before paying you wages. As an employee, you normally pay tax through the PAYE system. Wages include sick pay, maternity pay, paternity pay and adoption pay. The tax is paid in the complete tax year rather than paying in lump sum. Your employer is responsible for sending the tax and NI on your behalf to the HMRC. 


PAYE is also used for people to receive an occupational pension from previous employers. Every month your employer hands out a payslip to you. And from that slip, a chunk of money is taken by HMRC. PAYE is calculated on the basis of your earnings and whether you are eligible for the personal allowance. The personal allowance is the money you’re able to earn tax-free each year i.e. £12,500. 

Do students pay PAYE tax?

Yes, if a student has a job then they have to pay tax and NI. This also applies if you work abroad during your holidays and if you are a foreign student working in the UK. 

Students have to pay income tax if they earn more than £1,042 a month on an average (personal allowance) and also National Insurance if they earn more than £166 a week. Your employer will deduct tax and NI from your PAYE and send them to HMRC. Students can reclaim tax if they stop working in the middle of the tax year which runs from 6th April and ends on 5th April. If you leave a job your employer will give you form P45. You will need to hand over it to your new employer so that you don’t overpay tax in the future. 

When a student is living and studying in the UK but are working abroad during their holidays, they’ll need to pay tax as they are counted as a UK resident. This is accountable for anything above the personal allowance which is £12,500. If a student is self-employed then they need to file a self-assessment tax return each year with details of their income and expenses. HMRC will calculate the tax you should be paying. 

Do you get PAYE tax back?

HMRC gives a tax code that your employer uses to work out the tax to be paid through your PAYE. Then it is sent to HMRC before handing out the payslip to you. It is possible for your tax code to be wrong. Yes, you can claim a tax rebate on your PAYE. 

For example Travel refund: On your travel for work purposes, you would be splashing money on fuel, food, accommodation. All these expenses are accountable for tax reclaim. 

So, you are eligible for a PAYE tax refund if you have overpaid PAYE. The tax year works from 6th April to 5th April, so make sure your employment is within these dates you were overtaxed for. It is necessary to send the correct tax code to HMRC while claiming tax rebate on PAYE. Your employer will provide a refund in your pay if you were overtaxed. 

You can claim your PAYE tax rebate online. For this, you will require your employers PAYE reference number which can be found on your P60, as well as any details on taxable benefits and income you received.

Seeking help from your tax agent is a simple and quick process. 

Further Information visit at getting News 360 Accountant Industry Blog.