PAYE may include withholding the employee portion of insurance contributions or similar social benefit taxes.
As with many of the United Kingdom's institutional arrangements, the way in which the state collects income tax through PAYE owes much of its form and structure to the peculiarities of the era in which it was devised.
The financial strain that the Second World War placed upon the country meant that the Treasury needed to collect more tax from many more people.
This posed significant challenges to the government and to the many workers and employers who had previously never come into contact with the tax system.
Each person has a tax code which is used to reflect any allowances,[3] along with other taxable income (including the state pension).
A certificate is issued at the beginning of each tax year based on the employee's personal circumstances.
PAYE is deducted by employers from employees' salary or wages in New Zealand, and paid to the Inland Revenue Department (IRD) on their behalf.
Tax withheld must be paid to the IRD monthly or semi-monthly, accompanied (or sent separately in the case of electronic payment) with a completed IR345 Employer deductions form.
[7] The Australian Taxation Office (ATO) administers a pay-as-you-go tax (PAYG) withholding system.
The PAYG system involves regular payments made by employers and other payers, for example, superannuation funds.
For an employee's primary job, the withholding tax rate is lower because of the existence of a tax-free threshold in Australia.
This may be sent to the ATO electronically using Standard Business Reporting enabled software,[11] or it may be sent as a hard copy by mail.
The deduction is required for federal and provincial income taxes, Canada Pension Plan contributions, and Employment Insurance.
[14] Initially set to start in 2018, France introduced a pay-as-you-earn scheme for the collection of its state income tax (impôt sur le revenu) in January 2019.
In the United States, the term "pay-as-you-earn" and PAYE typically refer to Income-based repayment of loans, not taxation.