PAYE is the UK slang term relating to a tax deduction for the Government, made by the employer or agency, direct from employee’s earnings. It’s a quick hand abbreviation for “Pay As You Earn”.
Therefore, PAYE is an automatic tax deduction from your gross pay by your employer, which is then paid over direct to the Inland Revenue (HMRC). If your only earnings in a tax year are from your wages, it helps to ensure your tax has been paid in full, removing any stress of having to save up for your bill or having to do tax returns.
PAYE for Contractors
IR35 was introduced to ensure the majority of contractors pay tax along similar lines to employees in similar roles, at similar hourly rates. Prior to the release of IR35, contractors would pay significantly less tax by paying themselves through intermediaries such as Partnerships or Personal Service Companies.
Contractors outside of IR35 pay a combination of salary, of which PAYE is payable, and dividends. Dividends attract less tax over salary extraction but are not tax deductible for Corporation Tax Purposes.
EAFS accountants can advise on the optimal structure of salary and dividend. If a contractor is caught by IR35, they have to have tax, PAYE and NI contributions deducted from their pay as “deemed employees”.
Why Choose EAFS?
- We are Payroll Experts: We have major experience in Europe and hold all necessary licences for distributing payroll across the EU.
- Value for Money: Our fees are highly competitive and very reasonable, especially compared to other firms.
- We are on top of the Latest EU Developments: The legislation for the European Union is constantly changing, we stay up to date with all developments to provide the most legally compliant service at a competitive price.