PAYE Tax Contributions Hit 20 Year High As Employment Nears Record Levels
New research from The Global Payroll Alliance (GPA), the international trade organisation for payroll professionals, highlights the vital importance that payroll software plays within the UK economy, with PAYE tax contributions increasing 9.1% annually. once again hitting their highest level in the last two decades.
The Global Payroll Alliance analysed HMRC pay-as-you-earn (PAYE) tax receipt data* to reveal how much money is being generated by UK employees and how the latest totals compare historically over the last 20 years.
New HMRC figures show that UK workers contributed a total £258.9 billion in PAYE income tax in 2024/25.
This represents an annual increase of 9.1% compared to the 2023/24 total of £237.3 billion.
This marks the fourth consecutive year of PAYE growth and the highest level of PAYE contributions in the last 20 years. Since 2004, total annual PAYE contributions have increased by 138%.
Furthermore, the latest figures show that PAYE now accounts for 85.5% of all income tax contributions and 30.1% of all HMRC tax receipts – the highest proportion of total receipts recorded since 2004.
Why are PAYE contributions on the rise?
One of the key reasons PAYE contributions continue to climb is the strength of the UK’s employment market.
Between 2023 and 2024, the number of people aged 16 and over in employment has increased by 0.8%, rising from 33.5 million in 2021 to 33.6 million. The most recent quarterly data shows that employment continues to edge upward, with Q2 2025 employment standing at 34.2 million, up 0.7% from the previous quarter.
The employment rate (ages 16–64) has also improved in recent quarters, rising from 74.5% in Q1 2024 to 75.3% in Q2 2025, an increase of 0.3%.
That said, job vacancies in the UK have fallen significantly, particularly within the services sector. The total number of job vacancies decreased by 16.5% between 2023 and 2024, falling from 911,000 to 761,000. New quarterly figures also show a continued decline, with vacancies dropping from 676,000 in Q1 2025 to 636,000 in Q2, a 5.9% fall.
Melanie Pizzey, CEO and Founder of the Global Payroll Alliance, says:
“The continued growth in PAYE contributions underlines just how essential payroll processes are to the UK economy. With nearly £260 billion passing through PAYE last year alone, it’s vital that companies ensure their payroll systems are both accurate and compliant.
Proper payroll isn’t just about paying employees on time, it’s about ensuring every tax contribution is correctly handled. Yet, too often, businesses focus purely on cost when choosing payroll providers, rather than prioritising functionality and reliability.
As we’ve seen, even with slight shifts in employment rates and job vacancies, PAYE remains a critical pillar of the UK’s tax infrastructure, and that places a major responsibility on employers to get payroll right.”