When it comes to company payroll in the UK, this refers to the number of wages that need to be paid by an employer to its list of employers. But how does it work in practice? TechRound explains in further detail about everything you need to know about company payroll.
What is PAYE?
PAYE refers to the system used by HM Revenue and Customs (HMRC) in order to be able to collect employee’s National Insurance and Income Tax contributions. If you are an employer, it is usually a requirement to have this system as part of your payroll. However, there are certain expectations when it comes to registering for PAYE, but you will still need to keep payroll records. These are the following cases where PAYE isn’t necessarily required:
- If no one who you employ is paid more than £116 or more each week
- If they get expenses
- If employees receive benefits
How to report payments to HMRC
If you are the person who has full responsibility for payroll, then it will be necessary for you to report your employee’s deductions and payments just before or on the day in which they will be paid. If there are any tax reductions you are applying for (for example statutory pay) another report will then be needed to sent to HMRC.
In terms of the amount of Income Tax and National Insurance contributions that you will need to pay, this will be calculated by your payroll software.
It may be possible to pay quarterly instead of monthly if you are a small employer who will be paying less than £1,500 to employees by contact HMRC directly.
How can I run a payroll?
If you are an employer, there are two ways in which you can operate PAYE within your payroll. You can choose to either:
Employ a payroll provider in order to sort out PAYE on your behalf
- In this scenario, you employ either an accountant or bureau for support
- You will need to provide your payroll provider with all the details of your employee’s details so they can run payroll effectively
- Depending on the level of support that you need, a payroll provider may also be able to help you with things such as making payment to HMRC and provide payslips
- It is worth remembering that regardless of whether or not you pay someone else to do your PAYE paperwork, it is ultimately you who is legally responsible for having them completed as an employer.
Decide to sort out payroll yourself using payroll software
- Once you have registered an employer with HMRC and have received a login for PAYE online, you can then choose payroll software, which will enable you to report payroll information to HMRC, work out how much you need to pay as well as record your employee’s details
- Payroll software may also be used if you need to record student loan repayments,, helping to calculate how much they will need to pay as well as deducting the amount (which will either be 9% of their annual income above £18,330 or £25,000)
- It may also be possible to deduct child maintenance payments directly from your employee’s earnings or a pension
- You will also need to pay any employer contributions to any workers that you employ pensions’. In most cases, you will take of pension deductions prior to taking off the tax
- If you sort out payroll yourself, you will also need to complete annual reports for the next tax year
On or before your employee’s payday
As an employer, there are a number of things you will need to take into consideration and remember every time it comes to paying those who work for your company. This is where using your payroll software can help to:
- Record their pay
- Calculate any deductions that need to be taken from their pay, this includes income tax and National Insurance
- Remember that for all earnings about £157 weekly, National Insurance contributions for the employer need to be calculated
- Produce payslips for your employee. These will need to be given on or prior to the designated payday. This will need to include the following details: gross wage, deductions that have been made, as well as net wages (i.e. pay after deductions). You should also make sure that the payslip shows the employee’s tax code, National Insurance, and their rate of pay.
- It may be possible to use the payroll software in order to be able to produce the payslips or to send them electronically. However, it may not be possible with certain kinds of software, which may then require you to have another type
- In a Full Payment Submission, you will need to report all employee’s pay and any deductions that have been made to HMRC