What is PAYE

Posted 28 May 15

PAYE, or Pay As You Earn is a system used by the employer to pay income tax and national insurance contributions to the HMRC.

The tax and national insurance is deducted from the employees’ wages in regular monthly instalments instead of in one, large sum at the end of the year. The amount of money the employee earns after the tax and national insurance is calculated according to HMRC regulations.

In 2013 a new way of reporting PAYE was introduced by HMRC. RTI, or Real Time Information requires the employer to submit the information about their employees earnings every time a new payment is made rather than at the end of the year.

Managing PAYE as an Employer

If you are a company owner employing staff to work for your business, you will first need to set up a PAYE scheme for each of your employees. You can find the basic guidance of the process on the HMRC website.

However, in order to avoid any confusions, contact our experts today and we will be happy to guide you though every step of managing your PAYE.

Tax Codes

When you register your employee with HMRC, they will receive a tax code which can be used to determine the amount of tax you need to deduct from their wages or pension. In certain cases HMRC might need to provide you with an emergency tax code and request more information so it can be adjusted.

Most PAYE codes are made up of a number and a letter, which relate to the type of allowance the employee is receiving and the income treated as allowances.

How to Manage PAYE?

As an employer you can choose to deal with PAYE obligations on your own by providing required forms and reports to HMRC using the software available on its official website. However, it can be very complex and exhausting. HMRC software does not handle pension contributions or produce payslips.

The safest and easiest way to ensure that you provide HMRC with the right information at the right time is to contact a professional and certified accountant. At Tawanda Accountants we offer full guidance and advice and can assist you in this process.

For just one fixed price of £100 we will help you complete your company information, register your company for self-assessment and register your company for Corporation Tax (CT41G), VAT and PAYE.

We offer our clients accounting and bookkeeping at competitive rates and make sure they understand each stage their business enters, so they can benefit the most from the experience that is having a successful company.

Paying HMRC debts with PAYE

You can pay HMRC debts with PAYE, however, the amount of money you can process via this method is limited. If you earn less than £30,000 a year, HMRC can collect up to £3,000 for a year. The maximum amount HMRC can collect from you in a year is £17,000.

Changes of Circumstances

No matter if you are a company owner or a contractor working for one, it is crucial that you report any changes to HMRC as soon as they occur.

About Us

As a leading UK accounting firm and expert business consultancy, Tawanda Accountants carry out scrupulous accounting and provide payroll services and procedures for small businesses, individuals and business start ups.