PAYE (Pay As You Earn) is HM Revenue and Customs’ system to collect Tax and National Insurance (NI) from employment. When paying employees through payroll deductions are taken for PAYE.
Payments to employees include their wages, tips bonuses, statutory sick pay, maternity or paternity pay. From these payments tax and national insurance is deducted for most employees. Other deductions may include student loan repayments or pension contributions.
All employees’ payments and deductions need to be reported to HMRC on or before each payday. Payroll software will calculate the tax and NI owed, including employer’s NI contributions on each employee earning above £157 per week. HMRC expect another report to claim any reduction on what is owed to HMRC e.g. statutory maternity/paternity pay. As part of the regular reporting HMRC should also be advised of new employees, leavers, and if an employee’s circumstances change e.g. they reach State pension age, they change their name or address.
Annual reports are to be submitted at the end of the tax year to include details of expenses or benefits.
Normally the PAYE is paid monthly. (You may be able to pay quarterly if you usually pay less than £1,500 per month).
Reporting PAYE in real time through your payroll to avoid Late Payment Penalties
Accurately reporting PAYE to HMRC in real time is really important, it helps to ensure that your employees pay the right amount of tax.
The payment date reported on your FPS should be the earlier of either the date an employee is paid or the date they were entitled to that payment.
When an electronic message is received from HMRC saying that the submission was successfully received, it does not necessarily mean that it was correct and on time – it is just an acknowledgement of receipt.
Late Reporting Reason Codes
If you think you have a reasonable excuse for filing late you should use a late reporting reason code, use the code for every payment on the FPS where the circumstances apply.
Don’t ignore Generic Notification Service (GNS) electronic warning messages. These messages are intended to be a helpful service to notify you that you haven’t filed on time. A message will be sent:
- Once in a month when a Full Payment Submission (FPS) is received later than the payment date without a valid reason or,
- On the 11th or 12th of the month where an FPS hasn’t been received for the month that just ended on the 5th, or an Employment Payment summary (EPS) stating no employees were paid in that month. Penalties may not be charged in all instances where employers don’t file on time. However the electronic messages identify that your submission process may need to be reviewed to ensure that things are correct in the future. You can check your messages in the same way you do if you receive electronic coding notifications, either by:
- Logging into PAYE Online and selecting the generic notifications from within the “Notice summary” section
- Using the PAYE Desktop Viewer
- Using your commercial software
- Accessing your Business Tax Account and using the ‘messages’ link.
It is strongly recommended that you check for any electronic notice messages that may have been sent – as they contain helpful and important information. If you change your email address, don’t forget to update PAYE Online to ensure you continue to receive emails alerts when they are issued Tax Codes, Generic Notifications etc.
Contact Karen Harries or Andrea Cormor for more information by emailing email@example.com or call 01242 776000.