PAYE (Pay As You Earn)
The UK system for collecting income tax + National Insurance directly from payroll each month.
PAYE — Pay As You Earn — is the system HMRC uses to collect UK income tax and National Insurance from employees throughout the year, rather than via an annual self-assessment return. Each pay period, the employer deducts the correct amount based on the employee's tax code and pays it directly to HMRC.
Tax codes (e.g. 1257L for the standard 2025/26 Personal Allowance) signal to the payroll software how much tax-free pay the employee is entitled to. The code can change mid-year if circumstances change — a marriage allowance election, a benefit-in-kind adjustment, or a change of employer typically triggers a recalculation.
PAYE applies only to the UK. Other countries have their own equivalents: PAS in France (Prélèvement à la Source), Lohnsteuer in Germany, withholding tax in the US. This calculator models the PAYE stack (income tax + NI Class 1) for the 2025/26 tax year against the published HMRC rates.
Calculator pages that use this term
See also
- National Insurance (UK) — The UK's second payroll tax — funds the state pension, NHS, and unemployment benefits.
- Personal Allowance (UK) — The slice of annual UK income that is not subject to income tax — £12,570 for 2025/26.
- Higher-rate threshold (UK) — The UK income level at which the 40% higher-rate income-tax band begins — £50,270 for 2025/26.
- Marginal tax rate — The percentage paid in tax on the next unit of income earned — distinct from the average effective rate.