Glossary · UK
What is PAYE Settlement Agreement?
An arrangement where the employer pays the tax and NI on minor employee benefits in one annual payment.
Full Definition
A PAYE Settlement Agreement (PSA) lets an employer settle the Income Tax and National Insurance on certain expenses and benefits in a single annual payment to HMRC, so the amounts do not appear on employees' P11Ds or payslips. PSAs are limited to items that are minor (e.g. small gifts), irregular (e.g. one-off relocation costs above the £8,000 exemption) or impractical to tax individually (e.g. shared staff entertainment). The employer grosses up the benefit value to the employees' marginal rates and pays Class 1B National Insurance on the total — 15% for 2025/26. The grossed-up cost can be substantial, especially for higher-rate employees, but a PSA removes administrative burden and shields staff from a tax charge. Payment is due by 22 October (electronic) after the tax year.