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What Is Paye?

PAYE or Pay As You Earn is HMRC's system for collecting income tax and NIC or National Insurance Contributions. This article explains more...

PAYE or Pay As You Earn is HMRCs system for collecting income tax and NIC or National Insurance Contributions.

It covers any payments you make to your employees including: all statutory payments: sick pay, maternity pay, paternity pay, adoption pay and redundancy; salary, commission, bonuses, gratuities, overtime, expenses, cash payments and redundancy payments over £30,000. It also covers non-cash payments such as shares and employee benefits which, when taxable, should be entered on the P11D/ P9D and P11D/P9D - the end of year benefits declaration forms.

National Insurance payments are required from both employers and employees once they rise above certain thresholds. As an employer you must deduct the necessary contributions from your employees wages, add your employers NIC, both called Class 1 NIC and pay them direct to HMRC by the 19th of every month, by the 22nd of each month if you are paying online or quarterly if your average payments are less than £1500 per month. As an employer you will also have to pay Class 1A NIC annually on any benefits given to employees, these are due by July 6th following the end of the tax year.

PAYE related changes or updates to employment law, tax bands and allowances and other governmental introductions, such as RTI, Real Time Information, make it essential that you keep up to date with any changes so that you remain fine-free and comply with the law.

Many start-ups make it easier by relying on a specialist payroll provider to process their company payroll and keep on top of any relevant changes to tax or employment law.

If you would like further information or advice please call Linda at Fergus Neilson Payroll Experts on 01865989714, or visit:

Fergus Neilson

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