PAYE Deductions

Companies and businesses employing people in the UK are required to register for PAYE. PAYE stands for Pay As You Earn. The scheme must be operated by UK businesses offering employment opportunities and hired staff.

Small businesses normally asked their accountants to do their PAYE processing for them as it is cheaper and more time and cost effective compared to doing it themselves. They do not have buy expensive payroll processing software and pay annual licence fee to keep up to date with current tax rates.

The law requires companies to maintain a proper PAYE records system, filing appropriate PAYE forms to HMRC at each tax year, giving employees their pay slips showing their gross pay, deductions for income tax and national insurance contribution and net pay.

PAYE Deductions – Income Tax and National Insurance

As employers you must deduct income taxes and national insurance contributions on the payments made to your staff and pay it over to HM Revenue and Customs. You must also pay your part of the national insurance contribution called employer’s national insurance.

The payments made to staff subject to PAYE deductions include the following:

• Salaries and Wages
• Overtime and shift pay
• Bonuses and commissions
• Statutory sick pay
• Maternity pay
• Paternity pay
• Adoption pay
• Redundancy pay over and above any tax-free amount

The correct income tax rates and personal allowances must be used when working out your PAYE deductions.

Tax Code – Personal Allowance & Tax Free

Every staff should have a unique tax code that is issued by HMRC. The code represents the amount of tax free income your staff entitled to for a tax year. The tax code is effectively representing your staff personal allowance entitlement.

Outsource Payroll to Accountants

Concise Accountancy offers payroll processing services to small companies and growing businesses. Feel free to contact our accountants to discuss your PAYE requirements, they will be more than happy to help you and provide you with complete payroll solutions to your business.

Concise Accountancy – Making PAYE Simple For Small Businesses