If you operate a Pay As You Earn scheme, you will now be submitting details to HMRC every time you make a payment to an employee as part of Real Time Information, which was introduced for employers from April 2013. Previously, you would send information to HMRC at the year end. As part of operating a payroll, you will have tasks to complete throughout the year to ensure that your employees are paid the correct amount, the right amount is deducted, and you make the correct payments to HMRC.
Preparing for the new tax year
All employees must have a payroll record set up, so that you can report payments made to them throughout the year. It is required for everyone who is paid, no matter how much it is. Make sure that the details for each employee are correct, including name, address, date of birth and National Insurance number. You will also be expected to update your payroll software with the updated rates of income tax, National Insurance, and student loans.
You are legally obliged to pay each employee at least the National Minimum Wage at the correct rate. A statement must also be provided for employees each time they are paid; this should outline the gross amount of earnings, any income tax deducted and an employee’s Class 1 NIC. Depending on the circumstances of each employee, you may also have other deductions that you have made and these need to be included on the pay statement. At the end of each tax year, you will also provide each employee with a P60, which details the total amount of pay and any deductions made, including income tax and NIC.
As part of Real Time Information, you need to set up a record for every employee. Either just before or when you pay an employee, you must record the amount paid and all deductions. The payroll software will be used to store the information, along with the reports you need to submit to HMRC when you make a payment. You can use either commercial software or Basic PAYE Tools from HMRC. However, this option is only suitable for those with fewer than 10 employees.
You have a legal obligation to retain payroll records for the correct amount of time, or risk being fined by HMRC. There are other records that need to be retained for employees, including details of hours worked, holidays, any accidents or injuries, and many other details. It is advisable to seek advice if you are dealing with payroll, to ensure you remain compliant with HMRC regulations.
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