What Is PAYE? Pay As You Earn Explained

How PAYE works

Each payday your employer works out the Income Tax and National Insurance you owe, takes it from your gross pay and pays it to HMRC. You receive what is left. It covers most employees and some pensioners.

What your tax code does

HMRC gives your employer a tax code that says how much tax-free pay you get. The employer uses it to work out the tax on each payment. The standard code for 2026/27 is 1257L.

What PAYE takes

• Income Tax on pay above your allowance.
• National Insurance on earnings above £12,570 a year.
• Student loan repayments and pension contributions, where they apply.

PAYE and Self Assessment

If all your income goes through PAYE you normally do not need to do a tax return. If you have other income, such as self-employment, you may need Self Assessment as well.

See what you take home with the take-home pay calculator.

This guide is general information, not financial or legal advice. Rates checked 8 October 2026 against GOV.UK.