Here is an outline of what you need to do to set up and run your payroll. We, at Prime Accountants, can help you to set up and run your payroll or we can run your payroll for you.
To set up a Pay As You Earn (PAYE) system with HMRC, new employers must either contact the New Employer’s Helpline at 0300 200 3211 or register online through the GOV.UK website.
Once registered, it is the employer’s responsibility to operate PAYE and calculate National Insurance Contributions (NICs). In addition, there are various statutory payments, such as
- statutory sick pay (SSP)
- statutory maternity pay (SMP)
- ordinary statutory paternity pay (OSPP)
- shared parental pay (ShPP)
- which employers may be required to make periodically.
The GOV.UK website provides a wealth of information on operating PAYE, along with online calculators that can be accessed through the HMRC Basic PAYE tools. HMRC can also provide booklets and tables to help employers with deductions and payments to their employees upon request. However, most employers prefer to use the HMRC Basic PAYE tools or similar software.
REAL-TIME INFORMATION REPORTING
Typically, employers or their representatives must submit online payroll reports for every pay period throughout the year, providing information on employee payments and deductions on or before the date that employees receive their pay. For more in-depth guidance on managing your payroll with Real Time Information, visit the HMRC website.
WHAT TAX DO I HAVE TO DEDUCT?
The HMRC website provides calculators or similar software to help you determine the amount of tax and National Insurance Contributions (NICs) owed for your employees.
Calculating the tax for a specific employee involves subtracting their tax-free pay, which is determined by their coding notice and pay date, from their gross pay. The remaining amount is subject to tax and can be calculated using the Basic PAYE tools or other software.
Usually, tax is calculated cumulatively, taking into account an individual’s circumstances for the entire tax year thus far.
WHAT ABOUT NICS?
Both the employee and employer are responsible for paying National Insurance Contributions (NICs) on the gross pay of the employee for a given tax week or month. NICs are calculated on a non-cumulative basis and can be computed using either the HMRC Basic PAYE tools or comparable software.
WHEN DO THE TAX AND NICS HAVE TO BE PAID TO HMRC?
The tax and NICs should be remitted to HMRC by the 19th of the month following the payment. The tax months begin on the 6th and end on the 5th of the following month. Therefore, if an employee was paid on 25th July (during the tax month of 6th July to 5th August), the tax and NI payments should be submitted to HMRC by 19th August.
Electronic payment is available for any employer who wants to take advantage of the cleared electronic payment date of the 22nd, rather than the usual 19th.
Employers who make an average monthly payment of less than £1,500 can pay quarterly rather than monthly.
Large employers with over 250 employees are required to make electronic payments for taxes and other deductions.
FORMS YOU WILL NEED TO COMPLETE
To comply with HMRC requirements, you will be required to either complete the following forms or maintain their digital equivalents:
P11 Deductions working sheet
This form, or an electronic equivalent, should be maintained for each employee and should outline their pay and deductions for each week or month of the tax year.
P60 End-of-year summary
This form should be completed and given to all employees who were employed during a tax year.
P45 Details of employee leaving
This form must be provided to any employee who leaves and should outline the earnings and tax paid thus far in the tax year. New employees are expected to provide the P45 from their previous employer.
Upon the hiring of a new employee, it will be necessary to inform HMRC so that the employee can be paid under RTI. Some of the relevant information may be obtained from the employee’s P45, if they have one from a prior job.
Employers who do not fulfill the following obligations may be subject to penalties by HMRC:
- Submitting online payroll information on time.
- Making timely payments of liabilities.
- Maintaining the necessary records.
- Accurately operating PAYE or NICs.
- Correctly providing statutory payments.
- Timely provision of relevant forms to HMRC or employees.
Compliance with all regulations is essential for employers to avoid any potential penalties imposed by HMRC.
AUTOMATIC ENROLMENT PENSIONS
Employers have duties to automatically enroll eligible “workers” into a workplace pension scheme from a specified “staging date” under the automatic enrolment scheme. These duties include:
Assessing the types of workers in the business.
Providing a qualifying automatic enrolment pension scheme for eligible workers.
Providing information to workers about automatic enrolment and how it will affect them.
Automatically enrolling all eligible jobholders into the pension scheme and paying employer contributions.
Completing the declaration of compliance and maintaining accurate records.
Further details about automatic enrolment in workplace pensions can be found in the PENSION REGULATOR website.
HOW WE CAN HELP
If you find it challenging and time-consuming to handle payroll basic procedures for your business, we are here to help. As a UK-based business, we can guide you on how to correctly operate PAYE, provide continuous support on relevant issues, or take care of your payroll for you. If you are interested in our services, please do not hesitate to contact us at Prime Accountants.