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What income is subject to tax via PAYE?

Income tax is applied via PAYE to income which counts as ‘employment income’. This note sets out the basic definitions of what is employment income, who it applies to and when. It also sets out the rates of income tax.

Who does tax via PAYE apply to?

Tax via PAYE applies to employees and office holders in their earnings from that employment or office. Wherever the term ‘employee’ is used throughout the employment taxes module, this will include office holders unless specifically stated otherwise. The definition of an office holder is not simple, but broadly an office is ‘any position which has an existence independent of the person who holds it’. It applies to all statutory directorships. For other cases, consideration should be given on a case by case basis. See Simon’s Taxes E4.201–E4.204 for more.

The definition of an office holder should therefore be regarded as including a limited company director, a point which was underlined in the 2023 First-tier Tribunal (FTT) case of Purple