As of March 2016, Inland Revenue has ruled that certain types of holiday pay must be taxed at the higher PAYE rate of extra pay, rather than the regular salary or wages rate.
The PAYE rate deducted depends on when the holiday pay is paid to the employee. In general, the:
This higher extra pay rate will be applied to holiday pay in advance, cashed up holiday pay, and termination payments. As you add holiday pay, Ace Payroll will calculate the correct PAYE rate for you.
Here’s how it would work if you entered holiday pay in advance for an employee: