PAYE Settlement Agreement (PSA)
UK tax glossary · Last reviewed: April 2026
A PAYE Settlement Agreement (PSA) allows employers to pay the tax and NI due on certain benefits and expenses in one annual payment, rather than reporting each item on individual P11D forms. This simplifies administration and means employees do not see the benefit on their tax code.
Benefits suitable for PSA include minor items (e.g. staff gifts, team lunches), irregular benefits (e.g. ad-hoc taxis home), and items impractical to value individually. The employer pays grossed-up tax — they bear both the Income Tax and employer NI cost.
PSAs must be agreed with HMRC before the end of the tax year to which they relate. Once agreed, they renew automatically unless amended. Employers submit the PSA calculation and payment by 19 October (22 October electronically) after the tax year ends.
Common questions
How is tax calculated under a PSA?
The employer grosses up the benefit to find the equivalent gross income, then pays tax at the employee's marginal rate plus employer NI at 15%. This protects employees from any additional tax charge.
What types of benefits cannot go into a PSA?
Cash payments, benefits that are contractual entitlements, and items that are already exempt from tax or NI cannot be included in a PSA. Round-sum expense allowances also generally cannot be included.
Related resources
TaxHelper provides general information based on published HMRC rates and guidance. It is not regulated financial or tax advice. For decisions involving significant sums, complex circumstances, or if you are unsure, speak to a qualified accountant or HMRC directly.