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When do you deduct penalties - before or after PAYE?

Posted 8 December 2014 under Tax Questions


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Hi. I am a freelance writer. 25% PAYE is deducted from each episode as we submitted. In our contracts, it states that if we miss our deadlines, a fee will be deducted. I have since realised that the accounts department minuses the 25 % PAYE from the gross, then minuses the penalty. Shouldn't it be that they deduct the penalty from the episode fee, then deduct 25%?

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TaxTimTaxTim says:
9 December 2014 at 8:01

The penalty is for non performance and depending on your contract as to what this means to your actual income what decide how the PAYE works. If you are still earning the income and the fee being taken off is like a 'fine' then you will still have to pay tax. If you are not earning the income then you will not have to pay any PAYE.


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