PAYE

PAYE, or Pay As You Earn, is HMRC's system for collecting income tax and National Insurance from employees' earnings through their employers. Understanding how PAYE works is essential to ensure compliance and avoid penalties for your business.

Experience

How PAYE Works

PAYE deducts tax and National Insurance automatically from employees' salaries before payment. Employers use tax codes from HMRC to calculate deductions, then report and pay HMRC regularly.

The system spreads tax collection evenly across the year. You must use approved payroll software or HMRC tools to submit accurate returns on time, typically monthly or quarterly.

10^th

Experience

10^th

Experience

PAYE Obligations and Requirements

As an employer, you have specific responsibilities under PAYE to ensure legal compliance. Here are the key obligations you need to manage:

Register as an employer with HMRC before your first payday to avoid penalties.
Obtain correct tax codes for all employees from HMRC and update them as needed.
Calculate income tax and National Insurance contributions accurately each pay period.
Deduct student loan repayments if applicable, based on employee information provided.
Report payroll details to HMRC in real-time using Full Payment Submission (FPS).
Pay HMRC the tax and NI deducted, usually by the 22nd of each month following the pay period.
Provide employees with payslips showing gross pay, deductions, and net pay for transparency.
Issue P60 forms to employees at the end of each tax year summarizing their earnings and deductions.
Report expenses and benefits through P11D forms if you provide them to employees.
Keep accurate payroll records for at least three years for potential HMRC inspections.

10^th

Experience

10^th

Experience

Common PAYE Mistakes and How to Avoid Them

PAYE errors can lead to HMRC penalties and disrupt your business. Common mistakes include applying incorrect tax codes, submitting late returns, or miscalculating National Insurance. Not staying updated with tax changes increases risk.

Using automated payroll systems can reduce errors and save time. If your payroll is complex or you're unsure, professional advice ensures compliance. Our team at Business Accounting and Tax Limited is available to help you manage PAYE efficiently, with support outside normal hours.

10^th

Experience

10^th

Experience

Let's Connect

Get In Touch With Us

Call us at +44 7795 226823 or email [email protected] anytime. We're available outside normal hours for real-time assistance. Use our contact form for quick follow-ups, and we'll reply promptly.

Start with a free, no-obligation consultation to explore your options. We'll discuss your business needs, share insights on automation or tax savings, and outline how we can partner for growth. It's easy and straightforward to take the first step.

Get More Details

First Name *

Organization *

Phone

Email *

Enter your message

Captcha

Stay up to Date on Business & UK Finance

Worried you'll fall behind with what HMRC is up to? Never miss another change that affects your business again, by subscribing to our monthly newsletter.

Business Accounting and Tax Ltd provides automation-focused accounting, tax, and international services for small to medium businesses in Southampton and beyond. Contact us for a free consultation to grow your business.