P.A.Y.E.

This records PAYE income tax deducted from employees' pay, held on behalf of HMRC until it's paid over. As a liability it normally carries a credit balance: each payroll run increases it (credit), and payment to HMRC decreases it (debit).

Real-world examples

Hospitality

A hospitality business with a large casual and part-time workforce, many earning below the income tax personal allowance on a pro-rata basis, often has a PAYE liability that's small relative to headcount and swings noticeably month to month as seasonal staff are taken on and let go. A payroll run for 25 staff generating £2,100 of PAYE due is a credit of £2,100 to 2210, with the debit side already reflected in the gross wages expense posted when payroll was run.

Professional services

A professional services firm with a small number of well-paid, salaried staff has the opposite profile: a handful of employees can generate a large, stable PAYE liability each month, changing little unless someone joins, leaves or gets a pay rise. A payroll run for 8 staff generating £9,600 of PAYE due is a credit of £9,600 to 2210 — concentrated in far fewer people and much more predictable from month to month, making an unexpected variance easier to spot.

Commonly confused with

Because code 2211 (National Insurance) sits right next to this one in Current Liabilities, it's a common mis-posting target. Code 2210 is specifically for p.a.y.e., while 2211 covers national insurance — similar in nature, but keeping them separate is what makes the current liabilities section of your management accounts meaningful rather than a single lumped total.

What a mis-posting here costs you

An error posting to P.A.Y.E. misstates what the business owes, and for a Current Liabilities code specifically it can distort the working capital and current ratio that lenders and suppliers look at when assessing short-term financial health.

Other codes in Current Liabilities