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Employees earning a wage or salary are taxed directly from their pay. This is known as PAYE (pay as you earn). As an employer, you're responsible for deducting and paying PAYE income tax on your employees' behalf.
Each pay period you need to calculate and deduct PAYE. Each payday you send Inland Revenue the pay details for your employees. You also need to provide employee details, like start and end date, contact details and date of birth, for new and departing employees.
There are three options for payday filing:
PAYE is pretty straightforward once you're set up. But different rules can apply to some payments, eg lump sum payments like bonuses or retirement payouts, or to special types of workers. If you're at all unsure of what you need to do, speak to Inland Revenue or a tax advisor.
Find out what you know about tax types and levies for businesses and the self-employed. When you’re done, follow the links in the answers for more details.
The amount of PAYE you deduct depends on the employee’s tax code and how much they earn. To work out how much money to deduct, Inland Revenue has a calculator to help.
PAYE calculator(external link) — Inland Revenue
If you pay out holiday pay at 8% of annual income, use Inland Revenue's tax on holiday pay calculator(external link).
You can correct any mistakes in employment information you’ve already filed. This can be done online using Inland Revenue’s myIR service, by paper or by phone. If you file directly through accounting software or a payroll company, you may be able to do this through the software.
If you use myIR to file and pay PAYE, your business can also offer employees payroll giving — where they can donate money from their pay towards a charity approved by Inland Revenue.
Payroll giving(external link) — Inland Revenue
Avoid these common PAYE pitfalls: