PAYE stands for Pay As You Earn, and is the system implemented to stop the majority of individuals needing to fill in a tax return at the end of the financial year and pay their yearly taxes all in one lump- difficult for the individual, who probably won't know what they owe and may not have that kind of money set aside, and good for Revenue and Customs, who don't have such a huge surge of incoming forms at once. There are PAYE forms to be filled in and filed at the end of the financial year either by you or your payroll outsourcing service, though.
An amount is subtracted from every employee's pay each month. It goes straight to Revenue and Customs. Because the employee's rate of pay may change within the financial year, the PAYE amount is an estimate of the tax they owe, and adjustments may need to be made at the end. Other deductions may have to be made too.
The employee needs to be provided with a payslip stating their take-home monthly pay and letting them know how much has been paid in PAYE tax. Sorting this out is part of the payroll services we provide.