If your business has employees, you’re legally obliged to meet your payroll tax obligations. You’ll want to ensure that payroll is painless and that you take advantage of any opportunities to improve your tax-efficiency.
We’ve included useful tools and calculators, but most employers find it easiest to get professional payroll help. Accountancy Summit Ltd can advise you on what system would suit you best and the services on offer.
Payroll tax & PAYE
Payroll tax and PAYE
Payroll taxes are generally collected through the PAYE (Pay As You Earn) system operated by employers. If you have employees, you’ll almost certainly be required to operate PAYE unless all your employees have low earnings, aren’t given any additional benefits or don’t have income from another job or pension.
This applies even if you have set up a company with yourself as the only employee. You do not have to collect payroll taxes through PAYE if you are self-employed and have no employees.
Payroll taxes handled through PAYE include income tax and National Insurance contributionsdeducted from employees’ pay and the employers’ National Insurance paid by the business. The PAYE system involves calculating and paying any payroll taxes due to HM Revenue & Customs (HMRC), generally on a monthly basis.
The PAYE system is changing. By April 2014 all businesses will be required to report payroll information and send the tax and NI deducted electronically to HMRC every time an employee is paid - known as Real Time Information (RTI) - (instead of annually through form P46).
To do this you will either need to use RTI compatible software or outsource your payroll to a payroll bureau or Accountancy Summit Ltd. Alternatively, HMRC has produced basic PAYE tools and calculators which are suitable for small employers to use to fulfil their online filing requirements.
The new RTI PAYE system is linked to employees’ benefit payments – now known as Universal Credit payments - to improve the accuracy rate of tax payments and benefits.
You can find what you need to do to prepare for RTI PAYE reporting on the HMRC website.