PAYE

PAYE, or Pay As You Earn, is HMRC's system for collecting Income Tax and National Insurance from employees' pay. Understanding PAYE is essential for employers to stay compliant and avoid penalties.

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How PAYE Works for Employers

PAYE requires you to deduct Income Tax and National Insurance from employees' salaries each payday. HMRC issues tax codes to guide deductions based on personal allowances and circumstances.

You must report these deductions in real-time through RTI (Real Time Information). Missing deadlines can lead to fines, so setting up payroll correctly from the start is crucial for businesses in Greater Manchester and beyond.

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Key PAYE Responsibilities for Employers

Operating PAYE involves several ongoing duties to ensure compliance. Here are the main tasks you need to handle:

Register as an employer with HMRC before the first payday to avoid delays.
Calculate Income Tax using each employee's tax code provided by HMRC.
Deduct National Insurance contributions at the correct rates based on earnings.
Include other deductions like student loan repayments or auto-enrolment pensions.
Report pay and deductions to HMRC each time you pay an employee via RTI submissions.
Pay the collected tax and NI to HMRC by the 22nd of the following month.
Provide employees with detailed payslips showing gross pay, deductions, and net pay.
Issue P60 forms at the end of the tax year summarizing total pay and deductions.
Report expenses and benefits on forms like P11D if you provide any to employees.
Keep accurate payroll records, including payments and deductions, for at least three years.

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Common PAYE Mistakes and How to Avoid Them

Missing RTI submission deadlines is a frequent error that triggers automatic penalties from HMRC. Using incorrect tax codes can also cause under or over-deductions, leading to issues for both you and your employees.

For owner-managed businesses in Oldham, managing PAYE can be time-consuming. If you're unsure or want to ensure compliance without stress, professional help can save time and prevent costly mistakes.

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