Your partnership:
Payroll and PAYE
PAYE stands for "Pay as You Earn". It is a system for collecting income tax and National Insurance Contributions (NIC) from employees and directors as it is earned. In effect, the employer acts as a tax collector for HM Revenue & Customs (HMRC).
If your business is an employer (and your company will be an employer even if you are its only employee) then you need to maintain a payroll system and operate PAYE. Firstly you need to register with HMRC, who will provide you with an employer reference number which you need to use on official forms and correspondence.
Your payroll system could be manual or computerised, or you might find it more efficient to let someone else run your payroll system for you, and we would be happy to assist you with this. Even if you run your own payroll, you may want to obtain additional help from your accountant at certain times, for example assistance in preparing the year end forms.
 |  | Related literature: |
- Read a case study on how we have helped one client with their payroll
- Running a payroll is so complicated. Can you do it for me?
Your payroll obligations include:
- Keeping records of your employee's details, payments made, tax credits, deductions from pay such as income tax and NIC, and employer's NIC;
- Following procedures when new employees start and providing records to employees, such as the monthly or weekly payslip, the year end summary (Form P60) and a Form P45 on leaving;
- Paying tax over to HMRC. HMRC generally require the PAYE and NIC (net of any deductions such as tax credits) to be paid monthly, although quarterly payments are allowed where the payroll is small (PAYE and NIC less than £1,500 per month on average).
- Completing and submitting the year end forms. These include:
- Form P14, and end of year summary for each employee summarising all payments made to them and deductions during the year;
- Form P35 which is a summary of the deductions for all employees; and
- Form P11D, a summary of benefits (such as a company car) provided to employees.
There are various time limits for the submission of the forms and payments to the HMRC, and you may be charged interest and possibly penalties if you are late.
For more information on PAYE and business expenses, see our Running a business section.
|
Where next?
Within Your partnership...
- Your business structure
- Setting up
- Accounting systems
- National Insurance Contributions
- VAT
- Income tax
- Exiting a partnership
Within Your profession...
General...
