What does running payroll involve?
Payroll is the process of calculating what each employee is paid, deducting Income Tax, National Insurance and any pension contributions, and reporting it all to HMRC.
As soon as you pay an employee, or yourself as a company director, through PAYE, you take on these duties every pay period, usually every month.
Good to know
Under Real Time Information, pay must be reported to HMRC on or before each payday, not at the end of the month or year.
Registering as an employer
Before your first payday you normally need to register with HMRC as an employer. HMRC then gives you a PAYE reference and an Accounts Office reference.
You will also need payroll software that can send Real Time Information to HMRC, and details from each new starter, such as their starter checklist or P45.
Real Time Information (RTI) explained
Each time you pay your staff, you send HMRC a Full Payment Submission showing what each person was paid and what was deducted. It must be sent on or before payday.
If you have no employees to pay in a month, or need to claim allowances, you may also need to send an Employer Payment Summary.
Paying HMRC on time
The PAYE and National Insurance you deduct, plus employer National Insurance, is usually due to HMRC by the 22nd of the following month when paid electronically.
At the end of each tax year, every employee must receive a P60 by 31 May, and anyone who leaves during the year should receive a P45.
Workplace pensions and auto-enrolment
Employers must assess their staff for automatic enrolment into a workplace pension, enrol those who are eligible and pay contributions on time.
Payroll is where those contributions are calculated, so pension duties and payroll work best when they are handled together.
Getting help with monthly payroll
Payroll mistakes affect your people directly, and late reporting can lead to HMRC penalties. Many small businesses choose to hand payroll to an accountant for that reason.
An accountant can run each pay run, send RTI on time, produce payslips and remind you exactly what to pay HMRC and when, all online.
