PAYE

PAYEPAYE is basically the money that gets taken away from your wages for tax. The Pay As You Earn (PAYE) system is how you pay both your Income Tax and National Insurance (NI).

As an employer, you normally have to operate PAYE as part of your payroll. PAYE is HM Revenue and Customs (HMRC) system to collect Income Tax and National Insurance from employment.

You are exempt from PAYE if none of your employees are paid £112 or more a week, receives expenses and benefits, has another job or gets a pension. However, you must keep payroll records.

Payments and deductions

When paying your employees through payroll you also need to make deductions for PAYE.

Payments to your employees

Payments to your employees include their salary or wages, as well as things like any tips or bonuses, or statutory sick or maternity pay.

Deductions from their pay

From these payments, you will need to deduct Income Tax and National Insurance for most employees. Other deductions you may need to make include student loan repayments or pension contributions.

Reporting to and paying HMRC

Reporting pay and deductions

If you run payroll yourself, you will need to report your employees’ payments and deductions to HMRC on or before each payday.

Your payroll software will work out how much Income Tax and National Insurance you owe, including an employer’s National Insurance contribution on each employee’s earnings above £155 a week.

You will need to send another report to claim any reduction on what you owe HMRC, eg. for statutory pay.

Contact CAW Accountancy to assist with your PAYE needs.