There is so much to think about when employing people, so it is really important to
seek advice from the right places.
This article will concentrate and tax and national insurance issues, but I would urge
you to seek advice and guidance on such issues as:
● Checking employees’ legal right to work in the UK (it is illegal for an
employer to employee someone who has no work permit/visa to work in the
UK)
● Employment contracts. We work with Sandy Green of the HR Dept for HR
issues including employment legislation, contracts etc.
● Disclosure and Barring Service checks (DBS) previously known as CRB
checks. Employees may need checks for certain jobs, eg working with
children or in healthcare.
● Employers’ liability insurance, Pension auto-enrolment etc. We work with
Kevin Morris of Eagle Financial Services for independent pension, investment,
insurance and commercial loans advice.
● Health and Safety law. Visit the Health and Safety Executive (HSE) website
for more information.
● Statutory payments including maternity and paternity pay, sick pay etc.
PAYE AND NATIONAL INSURANCE AND EMPLOYING PEOPLE
Step 1: The first and most important thing to do is to register with HMRC as an
employer. You can’t pay anyone until you have done this. Register online here.
This includes you if you are the sole director of your limited company. We can do
this for you.
Step 2: Advise your accountant that you are employing someone, or invest in up to
date payroll software so that you can calculate employees’ pay, and file online with
HMRC.
Step 3: Tell HMRC that you are employing someone. This will be done through
your software, and will tell you what tax code to use for that employee. You
will need information from your employee including personal details, P45 from a
previous job etc.
Step 4: Work out how much to pay your staff after deducting tax and national
insurance. Your accountant or your software will do this for you.
Income Tax is deducted at 20% (basic rate) and if it is the employee’s only job,
they will be allowed their personal allowance before tax is calculated.
Employee’s national insurance is currently deducted from the employee’s pay at
12% (on pay above £153.01 per week, £663 per month)
Employer’s national insurance is calculated at 13.8% (on pay above £153.01
per week, £663 per month). This is not deducted from employee’s pay, it is an
additional cost to the employer (so do remember to include this when budgeting for
staff costs).
Step 5: File online with HMRC before or on the day that you pay your staff
(through your accountant or your payroll software).
Step 6: Pay your staff, and provde them with a payslip
Step 7: Pay HMRC – this will be monthly or quarterly, and the amount you pay will
be calculated by your accountant or payroll software. You will need to pay over all
tax and employees’ national insurance deducted from your employees’ gross pay,
plus any employer’s national insurance.
NB You must keep payroll records for 7 years
Employers’ National Insurance Allowance 2014/15
Find out more on our blog
I hope this is of use to you, but please be aware that the above is for general
guidance purposes only, and should not be relied upon as tax advice. For more
specific advice please contact me directly:
Sharon Pocock FCCA
Kinder Pocock Chartered Certified Accountants
01432 273400
07813 303849
