Payroll

Payroll

Why choose Freedom in Numbers to help you with payroll?

Payroll is complex, especially if you’ve got employees, student loans and auto-enrolment for pensions to contend with.

If you’re thinking about taking on employees or perhaps paying yourself, you’ll need to register as an employer to stay compliant with the HMRC.

To keep the HMRC happy, these payments need to be reported using ‘Real time information’ on or before the pay date.

With real time information (RTI) being a requirement by the HMRC for all businesses running a payroll scheme, you need to be using payroll software to report each payroll cycle to the HMRC within 19 days of your pay-run.

We have extensive experience with Payroll, auto-enrolment for pensions and RTI submissions, including registering businesses as an employer. If you’re struggling to understand what is best, and when to do it – get in touch and we’ll help!

It can be appealing to run your own payroll for your business, especially when taking on your first few employees.

However, it’s also important you get payroll right as there are lots of aspects and complexities that will affect your employees being paid right.

Tax law changes at least once year, and sometimes employees’ circumstances change which means they may need to start paying student loan deductions, or their tax code needs to change. Staying on top of the legislative changes and ensuring your employees are being paid right can be a headache in itself.

Outsourcing your payroll to a professional means you can relax knowing your employees are being paid right, and deadlines are being managed externally.

Don’t panic, we’re here to help!

 

What is payroll?

Payroll means a list of employees within a company and how much they are to be paid. Thats the technical term,  but it’s more commonly used in reference to employee wages and recording the amount of money an employee has made over time.

Payroll is essential in any business in which people are employed to work.

You need to run payroll to be able to:

Calculate how much your employees need to be paid,

Calculate how much tax and NIC you need to deduct from an employee’s gross pay,

Report employee pay details to HMRC,

and to pay your employees.

 

When do I need to register as an employer?

Unless you’re going to pay all your employees less than the Lower Earnings Limit for National Insurance (£120 per week – tax year 2021/22), you must register as an employer with HMRC before you take on any employees.

If your business is a limited company and you’re taking a salary, you may well have already registered the company as an employer, and if this is the case, you won’t need to register again when you’re ready to employ your first staff member.

 

What is the payroll setup process?

As an employer, you need to complete a series of tasks to pay your employees for the first time.

You can choose to pay your employers at whatever intervals suit your business, but the most common are monthly or weekly.

First of all, you must register as an employer with the HMRC and setup a PAYE online account. You should then choose the software you want to use to run payroll – we like Xero Payroll as it syncs with Xero.

You need to ensure you keep good records and report your payroll to the HMRC on time.

 

Do employees pay tax on their expenses?

In most cases, if an expense is related to an employee performing their job, the expense will not be liable for income tax.

Expenses such as the reimbursement of college or study fees are viewed by HMRC as a ‘benefit in kind’ and are liable for income tax deductions, but this only applies if the employee isn’t in work based training. Any training not related to their work is taxable.

The same applies when an employee receives shares. If the employer would like to reimburse the employee for the additional tax payment incurred, they can make a one-time payment to the employee in which the result sees the net payment offset the additional tax incurred.

What is auto-enrolment and how does it work?

Auto-enrolment is government law that stipulates that employers must provide a workplace pension for their employees. It’s designed to help people save for later life.

Even if you only employ one person, you should think about auto-enrolment because you may need to provide your employee with a workplace pension.

As an employer, you must set up a workplace pension scheme and enrol eligible employees into it.

Employees automatically make contributions to this pension, as do you as the employer. The government also contributes with adding tax relief to the contribution.

Most employed people are automatically enrolled into a workplace pension, but not everyone.

Employee Criteria:

be aged between 22 years old and under State Pension age | earn more than £10,000 a year (for the current tax year) | work in the UK.

What payroll software should I use?

There are many options on the market, including the HMRC’s basic PAYE tools. Some are better than others and you should consider all options and costs before choosing the best for your business.

We favour Xero Payroll because it’s easy to use, is built within the Xero product, and posts the payroll transaction into Xero for you so that your records are up to date.

Why choose us for payroll support?

 

As a business owner, you want to know that your employees are paid correctly and on time, and not get too hung up in how that happens. 

At Freedom in Numbers, we’re here to support your business, and take away the stress of the administrative side of business, giving you your freedom back.

We offer a monthly fixed fee service that it tailored to your business and will include all the services you’ll need to get started, including dealing with the HMRC on your behalf!

We will save you time and money.

We’re confident that you’ll love our brilliant customer service and have an excellent experience working with us.

 

Payroll tax rates

Payroll tax rates and allowances

Not sure what the tax allowances are for 2021-22, what salary as a director you should be taking to minimise your tax bill, or what tax planning opportunities you should be making use of?

 

Download our handy tax rates and allowances guide.

Still unsure what everything means?

No problem, we’ve got some FAQ’s that will help answer your questions.

What deadlines should I need to know?

Payroll real time information (RTI) should be submitted to the HMRC no later than the 19th of the following month after payroll has been run.

Payment of your tax liabilities under payroll need to reach the HMRC by the 22nd of the following month (3 days after the RTI deadline), unless you pay quarterly.

Do I have to wait until the new tax year to transfer payroll to you?

No! You can transfer payroll providers at any point during the year. Your previous payroll provider just needs to provide us with your payroll records, which will include the amounts paid for the year to date. 

What is auto enrolment?

Auto-enrolment is a government initiative that requires all employers (even those who just have one member of staff) to automatically enrol certain staff into a pension scheme and make contributions towards it. Usually the staff member will also have to make contributions to the pension scheme which the government may top up with tax relief.

Employers are required to contribute a minimum of 3% of qualifying earnings, with the employee to contribute (if they opt in) 5%, meaning a total of 8% potentially contributed each month. All though employers or employees may want to contribute more than the minimum required, which is allowed too. 

How much is PAYE and National Insurance?

The amount you pay depends on how much you earn.

Every taxpayer in the UK receives a tax-free personal allowance each year. For the 2021-22 tax year (6th April 2021 –  5th April 2022), your employees will receive a tax free earnings allowance of £12,570.

This personal allowance may change depending on the circumstances of the employee, including whether they are transferring some of their personal allowance through to their partner via the marriage allowance, or if they have more than 1 employer.

The standard rates of PAYE are 20%, 40% and 45%, and national insurance is 12% for employees and 13.8% for employers, with an additional rate of 2% for employees with the highest earnings. 

Freedom In Numbers - Accounting and Business support

 

We know running a business can be stressful, and sometimes it’s hard to know where to start.

We’d love to hear from you, and help you revolutionise your finance function.

Let us take the stress away, and help you get back to doing what you love.