payasyouearn

Pay as you earn (payasyouearn) is a term used to describe payment systems in which money is collected or charged in proportion to earnings or usage rather than as a fixed amount. The phrase is applied most often to tax withholding in the United Kingdom and to income-driven student loan repayment in the United States, among other uses.

In the United Kingdom, Pay As You Earn refers to the Pay As You Earn system for withholding income tax and National Insurance contributions from employees' wages. Employers operate PAYE by applying tax codes supplied by HM Revenue & Customs (HMRC) and remitting withheld amounts to HMRC on a regular schedule. The system aims to collect tax in real time and ensures employees pay tax as they earn, rather than in an annual lump sum. National Insurance and other deductions may be included.

In the United States, PAYE is an income-driven repayment plan for federal student loans administered by the U.S. Department of Education. Payments are capped as a share of the borrower's discretionary income and typically vary with income and family size. The plan may include interest accrual and potential loan forgiveness after a specified number of qualifying payments, with the duration and specifics depending on loan type and program rules. Eligibility requires federal direct loans and annual income verification.

Related topics include income-driven repayment and tax withholding.