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Paye is also an archaic term for caulking.

PAYE (pay-as-you-earn) is an amount collected by employers when making salary or wage payments to employees on behalf of the taxation authority. The amount deducted paid to the tax authority and is, in effect, a provisional payment of tax on the employee's income. The amount withheld is determined by tax tables that determine the amount of tax to be deducted for the salary or wage paid to the employee. Individual countries may apply this principle differently in order to streamline the administration process - the tax code in the UK is an example of such a variation. In some countries, the PAYE system is also used to collect national insurance or medical insurance contributions.

PAYE is intended to collect the expected amount of tax that an employee will have to pay during a year, so that the amount of tax payable at the end of the year is diminished. The tax authority determines the top-up or refund amount after the taxpayer has submitted their tax return. The final taxable income amount submitted by a taxpayer may end up being more or less than their salary or wage income because of other forms of income such as interest or dividends, which may not have been taxed or because of deductable expenses such as negative gearing costs on investments.

PAYE is, in effect, similar to withholding tax, but is generally considered administered separately by the tax authority. Submissions of PAYE by the employer are generally made with reference to the tax file number of the employee whilst submissions of withholding tax may be in respect of parties that are not even domestic tax payers. PAYE is generally calculated by the payroll software used by the employer, while withholding tax is an administrative function of accounts payable or the treasury department.

The PAYE system of income tax collection is used by most countries in the world. The UK introduced it 1944 ^[1], following trials in 1940-1 ^[2] The system is also known by different names in different countries, and may be combined with other tax collection processes. Australia, for example, supplemented its PAYE system called PAYG^[3] which also administers the collection of VAT and business income. Canada and the USA also use a PAYE type of tax collection system - although it is not known by this name.

This article or section includes a list of references or external links, but its sources remain unclear because it lacks in-text citations. You can improve this article by introducing more precise citations.

• http://www.hmrc.gov.uk/employers/tma-paying-someone-for-the-first-time.shtml
• http://www.hmrc.gov.uk/payetaxpayers/
• http://www.ustreas.gov/education/fact-sheets/taxes/ustax.shtml
• http://www.adviceguide.org.uk/index/life/tax/the_pay_as_you_earn_paye_system.htm

• UK PAYE Tax Calculator
• Reverse PAYE tax calculator