Keeping your staff and HMRC happy

If you employ staff in your company you have to operate a payroll scheme and PAYE as part of your payroll.

What is Payroll?

PAYE (pay as you earn) is an HMRC system to collect income tax and national insurance from earnings from employment.

When should you do it?

Payroll is normally run at the end of the month or on an agreed set date as per the company’s employment contracts. Full payment submission reports should be sent to HMRC on or before the pay date. The PAYE deducted from the payroll will need to be paid to HMRC by the 22nd of the following month. If any benefits are provided to employees, these are reported on form P11d and class 1A National Insurance is owed on these.

How do you do it?

Each month you will need to note any payroll changes, such as, pay rises, bonuses, new joiners, pension deduction details
and any leavers. This information can be run through payroll software to establish the necessary deductions and calculate the net wages owed. Payslips are prepared for distribution to staff and the amount owed to HMRC for PAYE is calculated. Real time information (RTI) reports must be filed with HMRC. At the end of the tax year a P60 must be prepared for each employee – this is a statement of earnings for the tax year.

What are the common pitfalls?

  • Real time information (RTI) filings are a requirement of HMRC and missing these filing deadlines could result in penalties.

  • Under the Pensions Act 2008, every employer in the UK must put certain staff into a pension scheme and contribute towards it. This is called ‘automatic enrolment’.

  • Be aware of your pension start date and have a provider ready to deal with it.

  • Remember deductions for pensions go through payroll.

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