PAYE is a method of paying income tax and National Insurance contributions and is used by all employers operating a payroll in the UK.
PAYE is a system that taxes earnings before they are received by the worker. It doesn’t apply to many contractors who operate through a limited company (PSC), however changes in IR35 regulation from April 2021 ensure that any contractors captured are paid through PAYE for those assignments.
If your end hirer decides that you are captured by IR35, then you may find it best to conduct your work under an umbrella company. By acting as your employer, the umbrella company invoices on your behalf and deducts tax and National Insurance contributions from your gross pay. HMRC provides a tax code to your umbrella employer to advise how much tax to deduct from your pay.