PAYE is a system used to collect which tax?

PAYE is a system used to collect which tax?

• A. Corporation Tax
• B. Value Added Tax
• C. National Insurance
• D. Income Tax

Answer: (D)

PAYE stands for Pay As You Earn, and it’s the system used to collect income tax from employees as they earn wages or salaries. Employers work out how much tax should be paid based on the employee’s tax code and earnings, deduct that amount before paying the employee, and pass it to HMRC. This spreads tax payments over the year so they’re taken in the same way as earnings are received. It’s true that National Insurance contributions are also collected through payroll under PAYE, but when asked which tax is being collected, the focus is on Income Tax.

PAYE stands for Pay As You Earn, and it’s the system used to collect income tax from employees as they earn wages or salaries. Employers work out how much tax should be paid based on the employee’s tax code and earnings, deduct that amount before paying the employee, and pass it to HMRC. This spreads tax payments over the year so they’re taken in the same way as earnings are received. It’s true that National Insurance contributions are also collected through payroll under PAYE, but when asked which tax is being collected, the focus is on Income Tax.