For people earning less than £50,000 who stay in employment all year and who have no other income, PAYE is a great system - it’ll usually collect the exact right amount of tax, spread evenly over the year.
For people earning between £50,000 and £100,000 with no other income, PAYE might get it exactly right, but it might not. Even in the absence of any other income, there are many other things that could affect your tax bill, in that bracket, including High Income Child Benefit Charge, higher rate tax relief on charitable donations and higher rate tax relief on pension contributions.
For people earning over £100,000, it’s highly unlikely that PAYE will get it exactly right. From that point you’ve got all the potential problems from the previous bracket, plus the gradual tapering away of the tax-free personal allowance, which the PAYE system does not cope with well.
For people earning over £125,000, the chance of PAYE getting it exactly right is close to zero. At lower levels, you’ve got a savings allowance, meaning £500 or £1,000 of interest is tax-free. Over £125,000, there’s no allowance, so £1 of interest is going to trigger a tax charge.
And if any of those people have some other form of taxable income, they’re going to have tax to pay. The PAYE system can’t possibly collect the right amount of tax on that, because it doesn’t know how much it is, or even if it exists. The PAYE system *will* try and collect an estimate of how much tax it thinks might be due based on previous years, but unless nothing changes, it won’t be right.
For high earners, the best way to look at PAYE is as a system that tries to collect approximately the right amount of tax, with the final bill to be established via your tax return (or an HMRC calculation if you don’t have to file a return). You can keep an eye on your PAYE coding notices (if you learn how to read them!) to check that HMRC’s estimates are reasonable in the light of what you know about your expected reliefs and other income, but don’t expect the deductions to be objectively correct - just see them as 12 reasonably estimated payments on account towards the eventual bill. And, if you do a tax return, try and get it done as quickly as you can after the end of the tax year so that you know about any shortfall (or receive any refund!) as soon as possible!
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