Tristan Noyes outlines an aspect of the PAYE system and considers when ‘emergency tax’ can cause problems. â¯
There are 30.4 million payrolled employees in the UK, paying tax through the pay as you earn (PAYE) system.
The PAYE scheme was introduced in 1944 following the Second World War. â¯It’s designed to deduct tax at each pay date (weekly or monthly), so tax is paid evenly throughout the year – avoiding you having to make large tax payments long after income is earned.
PAYE works by spreading out your allowances and tax bands through the tax year so you pay roughly the same tax each week or month. This works well for someone earning the same amount each month from one job for the whole year, but there are some scenarios that the PAYE system either cannot handle or takes a while to catch up on.
Here are a few examples:
