Pay As You Earn (PAYE) for Employers

What is PAYE?

Q: What does PAYE stand for?
A: PAYE stands for "Pay As You Earn." It is a system used by HM Revenue and Customs (HMRC) to collect Income Tax and National Insurance contributions from employees as they earn their wages.

Who needs to operate PAYE?

Q: Do I need to operate PAYE as an employer?
A: Yes, if you employ staff, you need to operate PAYE as part of your payroll. This applies even if you are the only employee (e.g., as a director of a limited company).

How do I register for PAYE?

Q: Where do I go to register for PAYE as an employer?
A: You can register via the GOV.UK website.

How does FreePayroll help with PAYE?

Q: How can FreePayroll assist me with PAYE?
A: FreePayroll automates PAYE calculations, ensures compliance with HMRC regulations, supports Real-Time Information (RTI) submissions, and helps manage all payroll-related deductions like Income Tax, National Insurance, student loan repayments, and pension contributions.

Setting Up PAYE

Q: How do I set up PAYE with FreePayroll?
A: To set up PAYE with FreePayroll, you need to register as an employer with HMRC and get a PAYE reference number. Once registered, enter your PAYE reference number and employee details into FreePayroll. The software will then handle the rest.

Real-Time Information (RTI)

Q: What is RTI, and why is it important?
A: RTI (Real-Time Information) is a system introduced by HMRC that requires employers to submit payroll information each time they pay employees, rather than annually. FreePayroll supports RTI, ensuring that you meet HMRC’s reporting requirements in real time.

Calculating Deductions

Q: How does FreePayroll calculate deductions?
A: FreePayroll automatically calculates Income Tax, National Insurance contributions, and other deductions based on the employee’s tax code, earnings, and applicable rates. This ensures accuracy and compliance with HMRC rules.

Employee Tax Codes

Q: What are tax codes, and how do they affect PAYE?
A: Tax codes determine how much Income Tax should be deducted from an employee’s pay. Each employee has a unique tax code, which indicates their tax-free allowance and taxable income. FreePayroll uses these tax codes to accurately calculate the correct tax deductions.

Payslips and Payment

Q: Can FreePayroll generate payslips for my employees?
A: Yes, FreePayroll can generate payslips for your employees. Payslips can be distributed electronically through the employee self-service portal, making it easy for employees to access their pay information.

Q: How do I pay my employees using FreePayroll?
A: After running payroll and calculating net pay, you can use FreePayroll to generate a payment file to upload to your bank, ensuring timely and accurate payments to your employees.

Reporting to HMRC

Q: How do I submit payroll information to HMRC using FreePayroll?
A: FreePayroll supports RTI submissions, allowing you to send payroll information to HMRC each time you run payroll. The software will guide you through the submission process to ensure compliance.

Common PAYE Issues

Q: What should I do if I make a mistake in my PAYE submission?
A: If you make a mistake, you can correct it in your next RTI submission. FreePayroll provides guidance on how to amend previous submissions to rectify any errors.

Q: How do I handle an employee’s tax code change?
A: When you receive a new tax code from HMRC for an employee, update their details in FreePayroll. The software will automatically apply the new tax code to future payroll calculations.

Getting Help and Support

Q: Where can I get help if I have questions about PAYE?
A: If you have questions about PAYE, you can visit the GOV.UK PAYE guide or contact FreePayroll’s support team for assistance.

Additional Resources

Q: Are there additional resources available to help me understand PAYE?
A: Yes, you can refer to the GOV.UK website for comprehensive information about PAYE, including guidance on operating PAYE, tax codes, and National Insurance contributions.

Updated on: 28/05/2024