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Payroll
What do you mean by Payroll
In simple terms, payroll can be defined as the process of paying a company’s employees. It includes collecting the list of employees to be paid, tracking the hours worked, calculating the employee’s pay, distributing the salary on time, and recording the payroll expense.
Every growing business struggle to ensure that the payroll of their employees is run on time because as the business grows so does legal responsibilities. It is very important that the Tax code used for each employee is correct and there are not any mistakes. Because any mistake in the tax code would mean wrong tax amount and National Insurance deduction. We can help our clients stay ahead of this time-consuming process and make sure that we are aligned with ever-changing legislation. Try us now, give us a call.
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How does payroll work?
In the UK, payroll tax works through the Pay As You Earn (PAYE) system. In simplest terms, if you’re an employer, it’s your job to work out how much tax your employees owe, subtract it from their pay packet and send it to Her Majesty’s Revenue and Customs (HMRC).
You do this every time you pay your employees – for the vast majority of businesses, that’s monthly – and the process is the same for salaried workers as for those paid by the hour.
As always, it’s crucial you keep your accounts up to date. In addition to making sure your workers are getting paid the correct amount, you also need to send your most recent pay deductions to HMRC by the 19th of every month if you pay by post and by the 22nd if you pay electronically.
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The most obvious payroll tax deduction is National Insurance, which employers have to pay both for themselves and for their employees when their earnings cross a certain threshold. It’s also worth noting that National Insurance contributions begin at a far lower level than formal taxes – the ‘tax-free allowance’ isn’t entirely free.
Workers who earn above a certain level will have income taxes deducted, and employers must also withhold contributions for things like student loan repayment and pensions.
Crucially, amounts will vary by a lot, dependent on government policy, your situation, and your employees’.
If you’ve made it this far, congratulations – you have enough to understand what payroll tax is and how it affects your business. You know you need to register your employees, send regular updates to HMRC and report and pay any taxes owed each month.
But how do you pay payroll taxes?
The good news is you have a lot of choice over how you do it. Though the government encourages businesses to pay online, you can still pay through the mail by check, by telephone banking or even in cash at your bank branch.
