This guide will give you a brief overview of what is within your payroll system and what you need to be aware of. Further articles explaining accountancy and payroll services in more detail are due to follow.

Payroll months/years – The Payroll year runs from 6 April to 5 April. Each month starting on the 6th of that month and running to the 5th of the following month.

Salary/Wages – You need to establish whether you are paying your workforce an annual salary to be split over 12 months or wages as per an hourly calculator per the hours they have worked.

Tax Code – Each individual is given a tax code each year. Loosely speaking it translates to the amount of untaxed income an individual can earn in a year. It is used when calculating tax and other deductions.

Taxation and other deductions – You will need to calculate the correct levels of tax, national insurance, statutory maternity and various other deductions for each individual for every payment period. These deductions then need to be paid to HM Revenue and Customs.

Declaration to HMRC – by the 19th day of the month of your payroll period you need to have submitted and paid your monthly declaration of tax and deductions to HMRC.

Monthly Reports etc – You need to provide each employee with a payslip each month showing what their total pay was and what deductions were made from it to arrive at their net pay. You also need to keep a record of your payroll and deductions for any inspection by HMRC.

Yearly Reports – By 19 May following the completion of each payroll year you as an employer are required to file a P35 to HMRC to declare the total amount of tax and national insurance deducted within the tax year. You are also required to provide each employee working for you at 5 April with a P60 showing what they have earned within that period.

Other reports – Should an employee leave your employment during the year then you are required to provide them with a P45 showing what they have earned and had tax deducted on in the time they have worked for you.

Benefits – Should you provide your employees with any benefits during the year then you must complete what is called a P11D for each of them which will assist in their tax calculations. You will also need to pay national insurance on any benefits provided to employees.

Submission of reports to HMRC – From April 2010 all new employers will be required to submit all payroll documentation online via the HMRC online PAYE software. Most software providers now incorporate online filing in their payroll software also. If you are already an employer pre April 2010 and are still filing paper returns then you will be ok to do this until April 2012 when all submissions will need to be online. HMRC encourages early adoption of online filing.

There are various other areas of payroll services which we could venture in to but will do so in future articles. These could be student loan deductions, the Construction Industry Scheme, pensions, national minimum wage, software recommendations and outsourcing payroll to name but a few.

Should you wish to discuss how to correctly set up your payroll system or how to administer any of the accountancy services dealt with above then please contact us at Accountancy Services Direct.

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