PAYG / PAYE is the tax you, as an employer, hold back from your employees pay to pay towards their end of year tax obligations. Here's how it works and what you need to be aware of as an employer.
Pay-As-You-Go PAYG Withholding (in Australia) or Pay-As-You-Earn PAYE (in the UK) is the tax you, as an employer, hold back from your employees pay to pay towards their end of year tax obligations.
When you start to pay employees, you need to register as an employer with the ATO or HMRC.
Xero will automatically calculate the amount of tax to be held back as part of each payrun.
Having paid the employees their net pay, you then need to make sure you pay the PAYG / PAYE to ATO / HMRC.
| Australia / ATO |
In Australia, for smaller startups, you pay this PAYG quarterly (as part of lodging your quarterly Business Activity Statement), but as soon as you are expecting to withhold more than $25k, you actually need to lodge and pay via a monthly Instalment Activity Statement (IAS). You'll reach this threshold pretty quickly, eg for one employee earning $100k, or two employees each on $60k. |
| UK / HMRC |
In the UK, you must pay your PAYE bill by the 22nd of the next tax month, if you monthly. We typically prepare the HMRC payment immediately at the same time as running payroll. |
Of course, if we're providing payroll services for you, we take of all of this for you :)
Australia / ATO
- PAYG Withholding information [ATO]
- Register as an employer for PAYG withholding [ATO]
- Tax basics for small business video series [ATO]
- How we prepare and lodge your IAS / BAS [Standard Ledger]
UK / HMRC
- Get your business ready to employee staff [HMRC]
- Paying PAYE [HMRC]
- Register as an employe for PAYE [HMRC]