What does this mean?
PAYE stands for Pay As You Earn.
It is a collective term for tax and national insurance that is deducted from employee’s wages when they are paid. The employer then pays the deductions to HMRC, along with the employer’s national insurance contribution.
Why is it collected this way?
PAYE is collected in such a way that, generally, the employee has paid enough during the year and doesn’t owe anything else. This can become complicated if they have second jobs. HMRC are now much better at dealing with this sort of situation though and issue new tax codes to ensure tax isn’t over or underpaid.
When does it need to be paid?
PAYE deducted in the month leading up to the 5th must to be paid to HMRC by the 22nd of that month.
If it’s paid late, HMRC can add surcharges and interest resulting in a much higher bill.
How is it paid?
You can pay by BACS straight to HMRC’s bank. You’ll need to use your accounts office reference (13 digits) and add four digits at the end as your reference number. These four digits change month to month and depend on the tax year. For 2015-16 these are –
5th May 2015 – 1601
5th June 2015 – 1602
5th July 2015 – 1603
5th Aug 2015 – 1604
5th Sept 2015 – 1605
5th Oct 2015 – 1606
5th Nov 2015 – 1607
5th Dec 2015 – 1608
5th Jan 2016 – 1609
5th Feb 2016 – 1610
5th Mar 2016 – 1611
5th Apr 2016 – 1612
Yes, if you’re a small employer (most are) make sure you’re claiming Employers Allowance. It’s a £2,000 allowance to deduct from Employers national insurance, meaning most small employers won’t pay anything at all.
This is being increased to £3,000 from 6th April 2016.
If all this seems too much though, why not ask us to give you a quote for payroll? We produce your payslips, send you relevant reports and give you a monthly letter with details amount to pay, reference number and where to pay.
Contact us for your coffee and cake meeting now!