PAYE (Pay As You Earn)
What it is
HMRC's system for collecting Income Tax and National Insurance from employees and directors who receive a salary through their company. The company deducts tax at source each payroll run and pays it to HMRC, usually monthly.
Why it matters
Any UK company paying a director or employee a salary must register for PAYE with HMRC first. Late registration and late payments both carry penalties. Directors who take only dividends do not need to operate PAYE.
Common mistake
Starting to pay a salary before registering for PAYE. Registration must come first — HMRC cannot accept payroll submissions from an unregistered employer.
Official source
GOV.UK — PAYE for employers ↗Disclaimer
General educational guidance only — not legal, tax, accounting, immigration, investment or financial advice. We don't guarantee the information is complete, current or suitable for your situation. Always check official sources (GOV.UK, Companies House, HMRC, the relevant professional body) and speak to a qualified professional before acting. Last reviewed: June 2026.