PSI2.1.9 - Taxation Background:-General – Schedule E - Paye

(This archived guidance relates to HMRC discretionary practice before the 6th April 2006. For current guidance on Registered Pension Schemes see the Registered Pension Schemes Manual)

Schedule E tax forms the bulk of the income tax revenue collected by the Department and most is collected through the PAYE (Pay As You Earn) machinery. Under this system employers are given coded information based on the employee's personal circumstances, which enables tax to be deducted from wages and salaries. Tax is also deducted under PAYE from pensions paid by approved schemes or schemes being considered for approval (including pensions paid in the form of income drawdown). The system operates cumulatively so that the tax deducted in any particular week or month is arrived at after calculating the total pay received and tax due from the start of the tax year. In practice most employees pay the right amount of tax over the year and there is no need at the end of the tax year for any adjustment.