Discovering that you are being investigated by HMRC can be very stressful, even if you are...
If you need some payroll tips for the small business, you've come to the right place. Key Business Consultants has you covered.
In today's article, we'll give you our top 8 payroll tips. Remember, payroll can be complicated. If you would like professional help, please get in touch. We'd be happy to arrange a free, no-obligation chat.
If you decide to do it yourself, make sure you read the HMRC guidelines to PAYE.
1. Get Your PAYE Number
Even if you only have one employee, you need to register as an employee. This involves setting up your PAYE scheme.
Once you register, you'll be given a unique employer PAYE number. You'll use this to identify yourself to HMRC and pay any taxes due. It can take up to five working days to get the number, so don't leave it to the last minute.
2. Make Sure You're Insured
If you employ one or more people, you need to arrange Employers Liability Insurance. This is a legal requirement so don't think you can do without.
Your policy must be for at least £5m. You can find out the details here.
3. Tell HMRC About New Employees
When you bring on a new employee, you need to tell HMRC. Ask the new staff member for his/her P45 from their last job. This has details of their tax status.
If the new employee doesn't have a P45, HMRC can still figure out their tax code. It just means you have to fill in a "starter checklist".
4. Stay On Top Of Minimum Wage Rules
UK employers are regulated by the National Minimum Wage rules. As of April 2020, the "living wage" is £8.72 per hour. The minimum wage depends on categories such as age.
Even though minimum and living wages are presented hourly, they apply to everyone. Even if your staff are paid monthly, they must receive the minimum amount.
5. Don't Forget Pensions
In 2020, all employers are required to enrol staff into a pension scheme. The individual employee is then allowed to opt out.
There are various rules and amounts to stay on top of. Check out the Pensions Advisory Service to make sure you are compliant.
6. Send Your FPS On Time
After each payroll run, you need to tell HMRC all the details. You do this by sending them a Full Payment Submission (FPS).
If you have good accounting/payroll software, this is relatively easy to do. Make sure you stay on top of this and don't let a backlog build up.
7. Stay IR35 Compliant
HMRC tries to prevent employees from claiming to be self-employed consultants. If a staff member works for you as a de facto employee, they need to pay the right amount of income tax. This is the case even if they claim to be "off-payroll".
Recent rule changes mean that you, as the employer, need to make sure this is being adhered to. You may want to work with an employment lawyer or professional accountant to make sure you're compliant.
8. Claim Deductions Via EPS
HMRC offers plenty of help for small businesses. For example, there is an "allowance" for National Insurance that you can claim.
To claim, make sure you submit an Employer Payment Summary (EPS) after each payroll run. This allows HMRC to see if you are due any deductions. Your payroll software makes this a relatively easy experience.
If you'd like us to help you with your payroll, please get in touch. Payroll is a tricky part of small business accounting, and it's often better to outsource it to an expert. We've worked with hundreds of small businesses and would be delighted to discuss your needs.