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No business owner enjoys doing a payroll run! But with a little preparation and good guidance you can stay on top of this critical job.
In today's article, we'll take you through everything you need to do a payroll run.
We generally recommend getting professional help for your payroll. It can be a complicated part of running a small business. And the penalties for making mistakes are high. You could have HMRC on your case (not to mention frustrated employees!).
If you'd like us to take over your payroll function, please get in touch. We'd be happy to arrange a free, no obligation call to discuss your needs. If you decide to do it yourself, familiarise yourself with the HMRC guide as thoroughly as possible.
Payroll Run Basics
A payroll run is the process of:
- Paying your employees
- Updating your records
- Informing HMRC of the details
- Paying HMRC any necessary tax
You have a certain amount of flexibility over when, and how often, to pay your staff. However, the reporting guidelines are quite strict. HMRC explains the sequencing:
- Register as an employer
- Choose a payroll software
- Keep records
- Tell HMRC about your employees
- Report to HMRC (having made the necessary deductions)
- Pay HMRC tax and National Insurance
You can think of tasks being necessary for three periods. You'll need to get set up before you start paying staff. Some things you need to do on or before payday. Others you need to do in the following tax month*.
(* A tax month runs from the 6th of one month to the 5th of the next)
Before you start paying staff, you need to register as an employer with HMRC. Use this link. It can take a week to get your PAYE reference number so don't leave it to the last minute!
Then you'll need to choose an online accounting software. Our article Payroll For The Small Business has some advice and recommendations.
Finally, you'll need to get set up for PAYE Online. This is where you will:
- Send payroll reports
- Access tax codes
- Appeal penalties
- Get alerts
On Or Before Payday
Before you pay your staff, you'll need to calculate the deductions. These will include:
- National Insurance
- Pension contributions
You may prefer to work with a professional accountant if you are not familiar with the UK tax system. Then you should carefully record the pay and produce a payslip for each employee.
As an employer, you have to pay National Insurance yourself, so calculate that next. Finally, send a report to HMRC with all the details. This is called a Full Payment Submission (FPS). Your payroll or accounting software should be able to do this automatically.
In The Following Tax Month
There are some allowances and deductions for small businesses. If you apply for these, you can claim a reduction on what you owe. You do this by sending an Employer Payment Summary (EPS). Send this by the 19th of the next tax month.
Once the figure is correct, you have until the 22nd of the month to actually pay HMRC.
If you'd like to work with us and take away some payroll stress, please get in touch. We are fully chartered accountants and have worked with hundreds of businesses just like yours.
We would be happy to have a free, no-obligation chat to discuss your business and what you're looking for.