What PAYE means?
Pay As You Earn (PAYE) is the system that enables us to pay our income tax and national insurance to HMRC. If you’re an employee, then this will almost certainly be taken care of automatically. Your employer will submit your income to HMRC and work out the level of tax they need to pay. If you are an employer, however, it is not always that simple. You should register with HMRC online when you are ready to start employing staff or using CIS subcontractors. If you pay an employee over £120, then you need to register for PAYE. So even if you are employing yourself as the director of a limited company, you must register. Tax is one of life’s few certainties, so it is not surprising to see how many employers must sign up for the scheme.
You must register before the first payday, but you cannot register two months before you start paying employees. Your employer PAYE reference number should be with you within five days of registering.
How to Calculate PAYE?
The amount of income tax and National Insurance contribution that you pay is dependent on your salary. For the tax year, 2021-22, you can earn £12,570 without paying tax. If you are self-employed and earn anything in addition to your wages, then the amount of tax and National Insurance you pay must be calculated through self-assessment. You must keep a record of all incoming and outgoings and complete a tax return form.
Is my tax code going to change?
Your code is calculated for the next year, which means that if you have periods of unemployment, you may be able to claim some money back at the end of the tax year.
Simultaneously, if you earn more money, you may be required to pay more. With this in mind, you should always double-check your tax code each time you receive payment. To assess this, you should have access to all relevant info on your payslip.
How FinacBooks Help?
If you are a small business owner, then PAYE will be a term to which you are well acquainted. PAYE is a fundamental aspect of payroll. FinacBooks is a leading small business accountants provider that maintains a directory of qualified, experienced and verified accountants who are specialised in doing payroll registrations, RTI returns, pensions, auto-enrolment and even responding to your accounting and tax-related needs promptly and provide business advice as needed. We have various accountants listed with us who will calculate PAYE for you and submit the relevant tax to HMRC.
We hope this article has answered many questions you have on PAYE and has given you the information to remain HMRC-compliant.
Any Questions? Request a callback from our Tax Experts.
