Ainsworth Accountants: Accounts, Tax and Business Advisors.

PAYE: Employee Tax

We have a full Payroll/PAYE Service.
We can register a PAYE Scheme for you and run your payroll service.

Our Payroll/PAYE webpage also describes the software options for small businesses.

PAYE is the UK Income Tax collection system for people who are employees.

Under the PAYE system, an employer will deduct Income Tax and Employees' National Insurance from an employee's gross salary, on a payslip, and pays the net salary to the employee.

The employer often also has to pay an additional Employers' National Insurance.

Every month the employer pays the deducted Income Tax and Employees National Insurance, plus the Employers National Insurance, over to HMRC.

Sole Traders

If you are a Self Employed / Sole Trader you are not an employee of your business.

Sole Traders pay Income Tax under Self Assessment on the profits of the business.

Directors of a Limited Company

If you have your own business which is a Limited Company it is likely that you will be a Director / Employee of the company which means you will need to operate a PAYE scheme.

What is a PAYE Scheme?

A PAYE Scheme is your registration of your Payroll with HMRC.

After registration, you will receive:
Employer PAYE Reference, example: 123/AB45678
PAYE Accounts Office Reference, example: 123AB00456789
Accounts Office, Shipley or Cumbernauld

Every month you will be required to send online to HMRC, the details of your employee's salaries. You will need specialist Payroll Software to file the monthly RTI.

Useful Links
GOV.UK: Register as an employer
GOV.UK: Employing staff for the first time
GOV.UK: PAYE and payroll for employers

When to Register a PAYE Scheme for your Payroll

If you employ someone, in most situations you will need to register a PAYE Scheme. There are very few situations when you will not need to register for PAYE.

You will not need to register a PAYE scheme if none your employees have another job or pension, and are not paid by you above the Lower Earnings Level (2015/16 £5,824) and have no other benefits from you.

Most importantly: if just one of your employees meets the criteria which require you to register a PAYE Scheme, then ALL of your employees, no matter what their wages or salary, must be reported to HMRC on the scheme. You cannot leave some out just because they are paid a small amount.

Whether you have a PAYE Scheme or not, you must keep a record of your payments to employees, their names and amounts.

If a new employee already has another job or pension, you will need to register a PAYE Scheme if you don't have one already, regardless of the amount of wages / salary you pay to the new employee.

If your employee, ie. already working for you (and you do not currently have a PAYE Scheme because the criteria have not been met), goes to work for someone else as well, your employee must tell the new employer about the employment with you. However, this does not mean that you have to register a PAYE Scheme because of this. However, the employee would have to do a Self Assessment to ensure that all the employment income is reported.

PAYE Scheme Registration

We can register and run a Payroll for your business.

If you employ people in the UK, you will need to register a PAYE scheme with HMRC.

You will also need to be registered to file PAYE online under the new RTI system.

This is a link to HMRC's 'How To' page, and this is a link to register for PAYE Online.

RTI: Real Time Information

RTI is the new online payroll "capture" system which was introduced by HMRC from April 2013. It is a legal requirement for most businesses to use this system.

Every month, businesses are required to file online all their employees' pay and tax deductions.

Most accounting software companies are ready for this, and you may see your payroll fees increase.

HMRC are offering free tools to help.
Click here for more information from HMRC.

Getting Ready for RTI

Because of RTI, many businesses are considering whether to carry on running their own payroll, or contract it out. We offer a Payroll Service.

If you are carrying on with your own payroll, check whether it is RTI compliant software. If you do your own payroll currently, you may find that you will have to upgrade to the latest version of your current software. We recommend QuickBooks.

To be ready for RTI, you will need to ensure that you have accurate and up-to-date information about all your employees, including: full name, date of birth, gender, address, National Insurance Number. This basic information will need to be uploaded, tested and verified by HMRC online for existing and new employees from April 2013.

Click here for more information from HMRC.

The BIG Changes with RTI

Every month, HMRC will be asking for quite a lot more information about your employees than previously, including hours worked and whether temporary or casual and starters and leavers online updates will need to be more or less 'up-to-the-minute'.

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What is RTI?

Real Time Information (RTI) is HMRC's online payroll "capture" system for PAYE which was introduced in April 2013.

It is now a legal requirement for most businesses to use RTI.

Every month you will be required to file online all of your employees' pay and tax deductions.

There are Penalties for late filing.
HMRC PAYE Late Filing Penalties

There are Penalties for late payment.
HMRC PAYE Late Payment Penalties

Once a PAYE scheme has commenced, a monthly FPS must be submitted.

A period of inactivity must be submitted if there are no wages or salary in a particular month.

Most Accounting Software is designed for RTI.

HMRC offer their free Basic Tools to run your basic payroll.

Click here for more information from HMRC: HMRC PAYE Webpage