Mini guide to your monthly PAYE commitments

Payroll regulations are constantly changing and even more lately with the introduction of RTI (Real Time Information) Reporting. It is a legal requirement as an employer to ensure your payroll reporting and payment process is both timely and accurate. Measures are being taken under the RTI rules to ensure that those businesses that fail to do so are subject to penalties and interest so Figurit have put together this mini-guide to detail some useful facts, figures and dates for your reference to help you keep above board with your payroll commitments.

Avoid missing deadlines and paying penalties with this mini-guide to PAYE

HMRC do provide a comprehensive section on their website providing everything you need to know about payroll. Click here to visit. To save you time though, our mini guide details some of the key points to give you a better understanding about PAYE and basic information to help keep your dental or medical business compliant.

S1: The basics – (read if you are completely new to payroll)

PAYE – what is it?

PAYE stands for “Pay As You Earn” and is the way HMRC collects Income Tax and National Insurance (NI) from employment. You, as an employer, are the channel to do that through on behalf of your employees.

PAYE – who pays?

If you have employees who earn over £111 per week then they will be subject to PAYE. A few other rules apply but to keep it simple, this is broadly the situation.

PAYE – how is it calculated?

In short, your employees are paid a sum of money in exchange for their time and efforts working for you. This is made up of salaries and bonuses as well as any adjustments for say statutory sick or maternity pay. Deducted from this sum are Income Tax and National Insurance that your employee is subject to, plus, an Employers National Insurance contribution for all employees earning over £153 per week. S2: Reporting on PAYE (including when and how)

PAYE – reporting via Full Payment Submission (FPS)

  • As an employer, you have to report income and deductions on all employees – This applies even if their income falls under £111 per week.
  •  Reporting is via an FPS that is generated by your payroll software
  • This FPS needs to be filed with HMRC on or before each pay day. There are exceptions to this deadline that can be viewed on the HMRC webpage. It’s best practice to avoid using these exceptions though unless you really need to.

PAYE – reporting via Employer Payment Summary (EPS)

  •  An EPS is also generated by your payroll software and allows you to reclaim things like maternity and paternity pay and the Employment Allowance.
  • Importantly too, if no employees were paid in the month then an EPS needs to be filed instead of an FPS.
  • An EPS is required for filing by the 19th of the following tax month, with the tax month starting on the 6th of the month. Deductions will be taken from your FPS as necessary

S3: PAYE – penalties for late filing (including how and when)

Failure to report by the above deadlines does result in penalties. In summary this includes:
  • Late submission of your FPS on or before the pay day, without valid reason
  • Sending the wrong number of FPS’s
  • Or, if you failed to send an EPS by the 19th of the following tax month, when you didn’t pay any employees in a month
Under RTI: Automatic penalties are issued for all businesses with over 50 employees from 6 October 2014…. and, for all other employers too from 6 March 2015

Exceptions to this are:

  • If you are a new employer – here you get 30 days to file the FPS for your first employee to allow time to set your payroll up
  • If it is your first offence in the tax year to report on time

How is the penalty calculated?

The penalty, which is applied monthly, is directly linked to the number of employees:
1-9            –   £100 10-49       –   £200 50-249    –   £300 250+        –    £400
An additional penalty may apply for failure to report within 3 months. This is calculated at 5% of the tax and NI due.

Other key points on late filing penalties:

  • Penalties are charged per payroll scheme
  • Penalty notices are issued in July, October, January and April with a 30 day term -Failure to pay the penalty notice on time results in interest
  • You can appeal your penalty notice if you have a valid reason
  • For more information on appealing your penalty notice, visit HMRC webpage
Existing employers with fewer than 10 employees can take advantage of relaxed rules until April 2015 – here you need to use late reporting code “E”

S4: Paying PAYE (including when and how)

Payment to HMRC is calculated as the amount presented on your FPS less any deductions and claims presented on your EPS.
  • Payment is due monthly by 22nd or by 19th if sending payment by post
  • Interest typically applies for late payment – This is charged daily at 3%
  • At the moment penalties will only apply if you consistently pay late or if the payment amount owed is a significant amount
From April 2015, penalties will be applied for late PAYE payments!

S5: PAYE – keeping records

All PAYE records must be kept for three years from the end of the tax year. Failure to do so may result in a penalty of up to £3,000 plus an estimation of additional PAYE to pay if they feel your reports were wrongly presented.

Summary

HMRC are tightening the rules around PAYE reporting and payment. Now most things are filed online there are fewer reasons to default too.

Simply do the following:

  • Get a reliable payroll reporting system
  • Use a payroll bureau if you don’t have support in-house – they are a great, cost-effective way to process your payroll and give someone else the responsibility.
  • Treat payroll reporting with importance -Report on time & Pay on time
  • If you do get penalties issued that are unfair, appeal – Else, pay them on time too and avoid interest, and, don’t default again.
Figurit keep up to date with all payroll regulations, including RTI. We work with an efficient payroll bureau for many dental and medical business owners or with whoever takes on the role within your practice. To disucss your payroll commitments, contact one of the team: 020 7376 9333