PAYE stands for Pay As You Earn and is HMRC’s method of collecting paying Income Tax and National Insurance contributions.
This is operated as part of your business’ payroll if your employees are paid more than £133 per week.
When you ask us to run your payroll, we’ll complete the specific tasks you’ll need to do when operating PAYE.
This includes; calculating the deductions from employees’ pay, such as tax and National Insurance contributions (NICs), calculating the employers’ NIC and submitting your RTI return.
The process of running your payroll
The process for us to run your payroll is very straight forward, and requires minimal input from you as the employer.
1. On the pay date you have provided, you will receive an automated reminder from us requesting the hours/days worked by your employees.
2. You should email these details to our payroll department on each pay date.
3. We will then process the payroll and reply to your email (the same day) with the payslips and a summary to show you how much to pay to your staff and how much to send to HMRC.
4. If you’re happy with the figures then simply reply to the email to say so and we will submit your RTI return.
Please note: If your payroll is part of our bulk submission (i.e. low director’s salary or amounts that stay the same each month) then we will process the RTI return automatically without you having to do anything.
It is important that you send us pay details on every pay date as failure to submit the RTI return in time will result in penalties issued from HMRC.
Our clients generally keep track of holiday pay for employees themselves. When calculating your holiday pay you will need to choose a leave year (the year your holiday calculations are based on).
A leave year is usually the tax year, calendar year or your financial year, but you can choose any dates that work for you as an employer.
Holiday entitlements are then renewed for employees from the start of the new leave year.
If you’re having trouble calculating holiday entitlements don’t hesitate to get in touch with our team on 020 3355 4047, who will be happy to help you through the process.
How to interpret your summary
Below you will see an example of the summary you will receive. Below the example is an explanation of what each column in this summary is for.
'Total Payments' is the employee's total monthly salary.
'Tax Deducted' is the amount of tax deducted from employees.
'Employee NIC' is the amount of National Insurance Contributions deducted from employees
'Net Pay' is the actual amount you pay to your employees.
‘Employer’s NIC’ is the amount of National Insurance Contributions made by you on behalf of your employees.
In the second box, you will see ‘Total Tax & NIC Due’ which is the total amount owed to HMRC for the pay period. The total for this example month is £814.80.
You can also see the ‘Total Net Outlay’, which is the total cost to you as the employer for the pay period.
How to pay HMRC
Payments must be made to HMRC on every pay date and there are a number of ways to make your payments. The main methods of payment are as follows:
1. Faster payment/CHAPS/BACS
You can make a transfer from your bank account to HMRC, details below:
- Account Number: 12001039, Sort Code: 08-32-10
You should use your 13 digit Accounts Office Reference number as the reference, which you can find on the front of correspondence from HMRC. Alternatively you can ask us for a reminder of this reference.
2. Pay online
You can pay online with your debit or credit card by following the instructions here. Again, you will need your Accounts Office Reference number. If you don’t have this we can provide you with it.
3. Direct debit
You can also set up a direct debit through your HMRC account if you are registered for one. The payments on your bank statement will show a reference ‘HMRC NDDS’. For additional methods of payment, please see the HMRC website by clicking here.
If you have any further questions regarding PAYE simply phone 020 3355 4047 and of our friendly advisors will be happy to help.