PAYE SETTLEMENT AGREEMENT (PSA): PAYMENT DEADLINES AND KEY INFORMATION
Many employers provide benefits to employees, such as staff gifts, vouchers, or social events. In some cases, the tax and National Insurance due on these benefits can be paid directly by the employer through a PAYE Settlement Agreement (PSA).
What is PAYE?
PAYE (Pay As You Earn) is the system HMRC uses to collect Income Tax and National Insurance from employees' wages before they receive their pay.
What Do Employers Need to Do?
If your business has a PSA in place, make sure the payment is made to HMRC by the required deadline.
22 October – Deadline for electronic payments.
19 October – Deadline for payments made by post.
Making payments after these dates may result in interest charges and penalties.
What is a PAYE Settlement Agreement (PSA)?
A PAYE Settlement Agreement (PSA) is an arrangement that allows employers to pay the tax and National Insurance on certain employee benefits or expenses on behalf of their employees.
This means employees do not need to report these benefits on a tax return or pay the tax themselves.
What happens if I miss a quarterly update deadline?
For the first year of MTD for Income Tax (2026/27), HMRC isn’t issuing penalty points for late quarterly updates. From 2027/28, missed deadlines earn penalty points under HMRC’s points-based system, with a fine once a threshold is reached.
Example
If a company provides employees with gift vouchers or pays for a staff celebration that is included in its PSA, the employer can pay the tax directly to HMRC rather than asking employees to pay it individually.
Key Takeaway
A PSA can simplify the reporting of certain employee benefits, but employers must ensure payments are made on time. Check your PSA obligations early and make arrangements to meet the HMRC deadline to avoid unnecessary penalties.
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