Payroll - Basic Procedures

Payroll - Basic Procedures

New Employer

In order to set up a Pay As You  Earn (PAYE) scheme with HMRC it is necessary to contact the New Employer’s  Helpline on  0300 200 3211 or register  online via the GOV.UK website.

As an  employer you  will  be responsible for operating PAYE and calculating  National Insurance Contributions (NICs). There are also certain statutory payments you may have  to make from time to time which you need to be aware of. These include:

  • statutory sick pay (SSP)
  • statutory maternity pay (SMP) and
  • ordinary statutory paternity pay (OSPP)
  • shared parental pay  (ShPP).

A vast amount of information is available  on the  GOV.UK  website detailing the operation of PAYE together with online calculators these  can be accessed  as part of the HMRC Basic PAYE tools  at  https://www.gov.uk/business-tax/paye.

If requested HMRC   will send you several booklets and tables to enable  you to make the relevant deductions and payments to your employees. However the  majority of employers use the HMRC Basic PAYE tools or equivalent software.

Real Time Information  reporting

Employers,  or their agents, are generally required to make regular online  payroll submissions for each pay period during the year detailing payments and  deductions made from employees on or before the date they are paid to the  employees.

More detailed guidance and information on  operating your payroll under Real Time Information can be found at https://www.gov.uk/paye-for-employers or  in our Payroll Real Time Information factsheet.

What Tax Do I Have to Deduct?

By using the  calculators  provided on HMRC’s website or equivalent software, you should be  able to calculate the tax and NICs due in respect of your employees.

The tax due for a particular  employee is calculated by reference to their gross pay with a  deduction  for  their tax free pay which reflects their particular  circumstances (using their coding notice and the  pay   date). The  remainder of the pay is subject to tax and this is calculated using the  Basic PAYE tools  or  software.

Tax is generally calculated on a cumulative basis, looking at the individual’s circumstances for the tax year to date.

What About NICs?

NICs are payable by the employee and  the employer on the employee’s gross pay for a particular tax week or month and are calculated on a non cumulative basis.  The NICs can be  calculated using the HMRC Basic PAYE tools or equivalent software.

When do the Tax and NICs Have to be Paid to HMRC?

The tax and NICs should be paid to HMRC by the 19th of the month following the payment. Tax months run from the 6th to the 5th of the month, so if an employee was paid on 25 July (tax month being 6 July to 5 August) the tax and NI would need to be paid over to HMRC by 19th August.

Any  employer can pay electronically, if they wish, taking advantage of the cleared  electronic payment date of 22nd as opposed to the usual  19th.

Employers whose average monthly payments are less than £1,500 are allowed to pay quarterly rather than monthly.

Large employers, with  more than 250 employees, must pay tax and other deductions electronically.

Forms You Will Need to Complete

You will need to complete the  following forms or maintain the equivalent digital records:

  • P11 Deductions working sheet. This form (or a computer generated equivalent) must be maintained for each employee. It details their pay and deductions for each week or month of the tax year.
  • P60 End of year summary.     This form has to be  completed for and given to all employees employed in  a tax year.
  • P45 Details of employee leaving. This form needs to be given to any employee who leaves and details the earnings and tax paid so far in the tax year. New employees should let you have the form from their previous employer.
  • Starter Checklist. When a new employee starts you will need to advise  HMRC so that you can pay them under RTI. Some of the necessary information may  be obtained from the P45 if the employee has one from a previous job.

Penalties

HMRC impose penalties on employers who fail to:

  • make online submissions on time
  • pay the liabilities on  time
  • keep the necessary records
  • operate PAYE or NI correctly
  • make the correct statutory payments
  • provide HMRC or the employees with the relevant forms on time.

It is important that employers comply with all the regulations.

Automatic enrolment pensions

Automatic enrolment places duties on employers to automatically enrol ‘workers’ into a work based  pension scheme from a specified ‘staging date’. The main duties are:

  • assess the types of  workers in the business
  • provide a qualifying automatic  enrolment pension scheme for the relevant workers
  • write to most of their  workers explaining what automatic enrolment into a workplace pension means for  them
  • automatically enrol all  ‘eligible jobholders’ into the scheme and pay employer contributions
  • complete the declaration  of compliance and keep records.

More information on  Pensions - Automatic Enrolment can be found in the factsheet.

How we can help

The operation of PAYE can be a difficult and time consuming procedure for those in business. We will be happy to show you how to operate PAYE correctly, offer ongoing advice on particular issues, or to carry out your payroll for you so please do contact us.

FACTSHEETS & RESOURCES

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