PAYE stands for "Pay As You Earn" and is a system used to collect income tax and National Insurance contributions from employees' earnings. The system is operated by employers who deduct the relevant amount of tax and National Insurance from their employees' pay before paying it to them.

Under the PAYE system, employers are required to register with HM Revenue and Customs (HMRC) and obtain a PAYE reference number. They must also set up a payroll system to record their employees' earnings and deductions, and report this information to HMRC on a regular basis.

Employees are assigned a tax code by HMRC based on their income, personal allowances and other factors, and this is used by employers to calculate the amount of tax and National Insurance to deduct from their pay. The amount deducted is then paid to HMRC on the employee's behalf.

The PAYE system applies to most types of employment in the UK, including full-time, part-time, and temporary work. It is important for employees to check their payslips regularly to ensure that the correct amount of tax and National Insurance is being deducted.

Overall, the PAYE system is a crucial part of the UK's tax system, helping to ensure that employees pay the correct amount of tax and National Insurance on their earnings, and that this is collected efficiently by the government.