Payroll Services
When you employ someone – even yourself if a you’re company director – you fall within the PAYE (Pay As You Earn) system.
This essentially means that you have all your tax and National Insurance stopped at source, and you receive a net payment that is yours to keep.
HMRC issue all employees with a tax code, and this reflects the individuals personal allowance and any other circumstances that affect their tax position. This means that they should pay the correct amount of tax over the course of the year – even if the actual amount paid varies slightly each month.
It is the employer's responsibility to ensure that they operate the PAYE scheme correctly and pay over any deductions to HMRC in a timely manner. Employer’s need to submit regular payroll forms electronically to HMRC, and also make payslips available to employees. There are additional reporting requirements and forms that need to be prepared and submitted when employers take on a new starter, when an employee leaves and at the end of the tax year.
It’s worth noting that employer’s have to pay National Insurance on any salary, bonuses and BIK’s that are paid to their employees. It’s a cost that many business owners forget to factor in when they are working out their finances, but it’s essential that you factor this into your calculations.
Many Company directors – especially when first starting out – forget that by paying themselves a salary they are saving the company Corporation Tax. Even if you don’t have the money available initially to take a salary, it’s still worth processing this as it’s money you can take out of the company at a later date when finances pick up.
Auto Enrolment
If you have employees, you most likely have to operate a workplace pension scheme. There are some exceptions to this, and you don’t need to have a scheme if it’s only you as a director on the payroll. But for most employers, it’s another part of operating PAYE for your employees.
There are lot’s of regulations around this, but with the right guidance it shouldn’t prove too onerous. This is a service that we automatically include for all our Payroll clients, and we’ll happily guide you through this minefield so that you can relax safe in the knowledge that it’s all taken care of.
P11D
Other things covered by Payroll include Benefits In Kind (BIK’s). For example, a company car or private medical insurance counts as a benefit for your employees. As such, you need to report this to HMRC and the employees tax code will likely get amended as a result so that they pay tax on the value of this benefit. These benefits are reported at year end on a P11D form, and a copy of this is given to your employees for their records. This is a complex area, so it’s always worth getting some advice from a professional on the best way to manage these benefits.
As always, get professional advice on anything payroll related.
Getting it right will save you lots of tax, but getting it wrong could be very costly! Our friendly advisers at Abacus Accountancy are always happy to give you some advice and tips, so please call us on 01376 343535 or get in touch below.