PAYE72030 - PAYE operation: payments for PAYE purposes: holiday pay

Holiday pay paid by employers

For PAYE purposes employers must include in gross pay all holiday pay that they pay to their employees. The Employer Further Guide to PAYE and NICs (CWG2) tells employers how to operate PAYE. Where an employee receives two or more weeks pay at once before a holiday and no pay in the holiday weeks, PAYE will normally be worked out at the last week in which no pay is received.

Holiday pay after employee has left

Employers paying holiday pay to an employee who has left should not issue an amended or additional P45. They should

• Deduct tax at the basic rate
• Enter details of the payment and tax deducted on the employee's Deductions Working Sheet and write BR as the amended code

Holiday Pay Stamp Fund Schemes

In some industries employers contribute to Holiday Pay Stamp Fund schemes by buying stamps. The employer pays the employee's holiday pay to the value of the stamps, operating PAYE in the usual way. The employer is then reimbursed by the fund.

Deduction of tax from Holiday Pay Stamp Fund schemes is explained in the Employer Further Guide to PAYE and NICs (booklet CWG2).