If my Payment Notice reduces the application, do I also need a Pay Less Notice?

No. A Payment Notice, the payer's statement of the sum it thinks is due for the round, can cut the sum the payee applied for on its own: the reduced figure becomes the Notified Sum, the amount that legally must be paid, and nothing further is needed. The Pay Less Notice is a different, later notice, used to pay less than a Notified Sum that already stands, either because the payer missed the 5 day window for its Payment Notice, so the payee's application became the Notified Sum, or because a new deduction cropped up after the Payment Notice, such as a set off, money withheld to cover a cross claim, or a contra charge, a cost charged back for something like putting right defective work. A reducing Payment Notice does not turn into a Pay Less Notice; they are separate steps. Some payers serve a Pay Less Notice anyway, repeating the figure, which does no harm but is not required.

A mechanical subcontractor applies for £80,000 on a hospital job, but the contractor's surveyor values the work at £68,000. Well inside the 5 day window she serves a Payment Notice for £68,000 with the reductions shown. That is enough on its own: £68,000 becomes the Notified Sum, with no need to follow it with a Pay Less Notice repeating the cut. A Pay Less Notice would only come into play if, say, a fortnight later a damaged unit needed charging back and the contractor wanted to withhold a further £4,000. It is held in reserve for something new, not a second copy.