Glossary · 2026/27
What is PAYE?
PAYE (Pay As You Earn) is how employers deduct Income Tax and National Insurance from employees’ pay and pass it to HMRC. Each pay run is reported to HMRC in real time on a Full Payment Submission (FPS), on or before payday.
Also called: Pay As You Earn, RTI, Real Time Information
According to GOV.UK, for the 2026/27 tax year the PAYE bill is paid by the 22nd of the next tax month if paying monthly (the 19th if paying by cheque through the post), or by the 22nd after the end of the quarter if paying quarterly. Tax months start on the 6th.
So one month’s payroll reaches cash twice: wages on payday, then PAYE the following month.
How it is calculated
The PAYE bill for a tax month is the Income Tax and employee National Insurance deducted from pay, plus employer National Insurance, plus other deductions such as student loan repayments, less anything the employer can recover, such as statutory pay, claimed on an Employer Payment Summary (EPS).
Worked example
Example · illustrative figures
Employees are paid on 28 November 2026, which falls in the tax month 6 November to 5 December. Gross pay is £20,000; £4,000 of Income Tax and employee National Insurance is deducted, so £16,000 is paid to employees. Employer National Insurance is £2,300.
The FPS is sent on or before 28 November. The PAYE bill of £6,300 is paid electronically by 22 December 2026. So November’s payroll costs £22,300 in total, but leaves the bank on two dates.
How to read it
The figure that catches businesses out is employer National Insurance, which is a cost on top of gross pay and is paid with PAYE the following month, not on payday.
Common mistakes
- Sending the FPS after payday without one of the exceptions GOV.UK allows.
- Budgeting payroll at gross pay and forgetting employer National Insurance.
- Not telling HMRC when no payment is due for a month, using an EPS.
- Confusing tax months, which start on the 6th, with calendar months.
How it shows in Nella
Nella’s payroll check counts the PAYE due before your pay date when it works out whether payroll clears, and your tax timeline shows the payroll dates it holds. Nella does not run payroll. See payroll affordability.
Sources
Related
Nella provides financial information and education, not accounting or tax advice.
See it on your own numbers
Nella works these figures out from your books every month. Nella Pro is free for 60 days, no card, including the entries you approve posted to your books. After that, Nella Free keeps reading your books, with no time limit.
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