PAYE and National Insurance Contributions

HM Revenue & Customs requires a way of precisely recording, and collecting the income tax and National Insurance that everybody pays. The best way HMRC can do all this is through the PAYE (Pay As You Earn) system. Your employer works out, and after that will make, the required deductions from payments to their employees. They then pay these deductions over to HM Revenue & Customs.

PAYE and NIC accounting

The responsibility of calculating the right deductions rests entirely with the employer, and this applies to all employees. If you’re paying electronically, the deductions has be paid over to HMRC by the 22nd of every month. If you pay by cheque, then the deductions will need to be received by HMRC by 19th of the month.

When your standard payments are lower than 1,500 pound a month, it’s possible to ask to pay the PAYE once every 3 months. Add to that, if an employer pays any benefits to the employees, Class 1A NIC will be due on the benefits, and should get paid to HMRC by 6th July following the end of the relevant tax year.

As a result of the different forms and legislation surrounding PAYE, it can be a lot of tiresome and complex work to handle. The various tax rates, allowances and thresholds can be challenging to keep abreast of, as they change constantly. It is quite often easier, and a far less complicated, to engage an Accountant, or even a payroll agency to look after the payroll for you, leaving you with much less stress, and plenty of time to pay attention to your core business activity!

Exactly what does PAYE (Pay As You Earn) apply to?

PAYE and NIC services

PAYE applies to all sorts of payments to employees. The following are examples of payments to employees that will come under PAYE and National Insurance deductions: –

  • Salaries and wages.
  • Tips
  • Bonuses.
  • Certain Redundancy payments
  • Pay in lieu of notice

Like it or not, as a business manager you are the Treasury’s unpaid tax collector. Not only do they not pay you, but if you get it wrong they come down on you like a tone of bricks.

The penalties which can be charged for failing to properly apply the PAYE and NIC regulations are amongst the most stringent on the tax statute book. Failure to comply can ruin a business. As always, ignorance of the law is no defence.

For payroll Alexander Ene can make all the calculations, complete all the forms and tell you how much to pay and when. We can also deal with the PAYE Inspector and the DSS Inspector if required.