PAYE principles apply to pension income, with pension payers treated as employers and pensioners treated as employees (the Income Tax (Pay As You Earn) Regulations 2003 (SI 2003/2682), reg. 11(1)). A pensioner is treated as having a deemed employment that starts when the pension is first paid and ends when it is no longer paid.

The application of PAYE principles to pensioners is, however, subject to modification in numerous instances. The following PAYE regulations do not apply to pensioners or pension payers in their capacity as such (SI 2003/2682, reg. 11(2)):

cumulative basis: subsidiary PAYE income of employee paid weekly or at greater intervals (reg. 25);

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