Complex sentence: PAYE (or pay-as-you-earn) is a type of income tax that is deducted (or withheld) from a person's income by their employer as they earn it.
Split into simpler sentences: PAYE (or pay-as-you-earn) is a payroll deduction system for collecting income tax. Under the PAYE system, tax being deducted (or withheld) from a person's income by their employer as they earn it.