Pay As You Earn (PAYE)
Introduction Pay As You Earn (PAYE) is HMRC's system for collecting income tax and National Insurance contributions (NICs) from employees.
Here we explain who has to register for PAYE, employers' statutory responsibilities along with PAYE paying and reporting requirements.
Registering for PAYE All employers must register for PAYE if their employees are paid £123 or more a week, receive expenses and benefits, or get a pension. Employers must register before the first payday. It can take up to 15 working days for employers to receive their PAYE reference number.
Employers who pay their employees less than £123 do not need to register for PAYE, but must still keep payroll records.
Employers' statutory responsibilities The main PAYE responsibilities that employers must meet are:
To pay employees their salary or wage, including any tips or bonuses and to comply with the requirements of the National Minimum Wage.
To deduct income tax and NICs from employees' pay.
To deduct student loan contributions from employees' pay, if applicable.
To provide an itemised pay statement to employees when they are paid.
To pay employees any statutory payments that they are due, for example statutory sick pay or statutory maternity pay.
To report PAYE information to HMRC.
Failure to comply with these requirements can result in financial penalties and legal action being taken against an employer.
Reporting PAYE information On or before each payday, employers must report PAYE information to HMRC by making a 'full payment submission' (FPS), which includes details of payments made to employees and deductions made by the employer. In some cases, employers must also submit an 'employer payment summary' (EPS) if, for example, the employer is reclaiming statutory maternity, paternity or adoption pay.
Paying PAYE deductions to HMRC
Employers have full responsibility for processing the correct deductions from their employees' pay and for paying those deductions, plus the employer's NICs, to HMRC.
Payments to HMRC are usually made using PAYE Online and the employer's payroll software. They must be made by the 22nd day of the month following the month in which the employees were paid, or the 19th day if payment is made by post.
If payments are late more than once in a tax year, a penalty of a percentage of the amount due will be charged by HMRC.
If an employer's combined bill for PAYE and NICs is less than £1,500 per month, payments can be made quarterly instead of monthly.
Contact Ashored for help and support with your Payroll responsibilities.