PAYE, or "Pay As You Earn," is a tax system used in several countries, including the United Kingdom. It allows employers to deduct income tax and National Insurance contributions directly from employees' wages before they receive their pay. This system simplifies tax payments for employees, as they do not need to file a separate tax return for their earnings. Under PAYE, employers are responsible for calculating the correct amount of tax to withhold based on the employee's earnings and tax code. This ensures that employees pay their taxes gradually throughout the year, reducing the risk of owing a large sum at tax time.