According to a definition, “A pay-as-you-earn tax, or pay-as-you-go in Australia and the United States, is a withholding tax on income payments to employees. Amounts withheld are treated as advance payments of income tax due. They are refundable to the extent they exceed tax as determined on tax returns.” Broadly speaking, employees normally pay tax through PAYE. Employer deducts the amount of PAYE. PAYE ensures that the yearly amounts you have to pay are collected evenly on each pay day over the course of the tax year. It is also used for people who receive an occupational pension from a previous employer.