Ensuring people in your employment are correctly taxed.

If your business has employees then you will normally require a Pay As You Earn (PAYE) scheme set up in order to meet your legal requirement to deduct income tax and National Insurance Contributions (NICs) from your employees and pay the amounts deducted over to HMRC each month.

You also have to report the payroll information to HMRC. Since the introduction of Real-Time Information (RTI) Reporting this has to be done every time you pay your employees, on or before the payment date. You will generally have to submit a return at least once a month.

Every person in employment, including casual workers, need to be reported therefore you should have basic information regarding each employee (name, date of birth, current address, current gender, start date). A new starter also has to provide a starting declaration that will allow you to deduct the correct amount of tax. The New Starter Form (P46) is a good way to get this information – it is usually possible to find most of this information from the employee’s P45, but they will have to fill in a starter checklist (which replaced the P46 form) if they don’t have a recent P45.

HMRC may issue a different tax code if they want to collect more (or less) tax due to the employee’s particular circumstances.

Tax is charged in bands at rates of 0%, 20%, 40% and 45%. NICs are charged on Employees at 0%, 12% and 2%, and on Employers at 0% and 13.8%.

The PAYE scheme is also used to collect the repayments of some student loans and to administer Statutory Sick Pay (SSP) and Statutory Maternity/Paternity/Adoption Pay (SMP/SPP/SAP).

Directors are treated as employees for PAYE purposes, but they have slightly different rules for calculating NIC deductions and may not need to meet National Minimum Wage (NMW) regulations.

If you would like to discuss how our employment and payroll services can benefit your business, please email customerservice@taxinnovations.com or call us on 01962 856 990.

For an initial consultation please call us on 01962 856 990 or visit our contact page.