PAYE – The Basics

HMRC  (Her Majesty’s Revenue & Customs) operate a system called PAYE (Pay as you earn) to collect Income Tax and National Insurance from pay as it is earned and this is all about PAYE – The Basics.

PAYE (Pay As You Earn) is collected from employees and from Directors of limited companies.

Once you take on the responsibility of being an employer you have to deduct tax and national insurance from your employees each pay period, this of course will vary depending on how much they are being paid.

Upon collecting these deductions, these amounts plus an additional amour of employers National Insurance Contribution has to be paid over to HMRC on a monthly basis.

Quarterly payments can be, again this depends on the value of the payments that need to be made.

PAYE – The Basics: There are strict deadlines on making these payments, should the payments be made late or for the incorrect amount penalties and interest charges can be applied.

At the end of the tax year an Employer Annual Return (form P35 and forms P14) must be made to HMRC, again there are deadlines for this with associated penalties and interest if late or incorrect.

If you are registered as an employer you will be required to send a year end return even if you have not paid anybody in the tax year and the return must reconcile to the payments made throughout the year.