Keeping errorless payroll taxes has become a standard for small and large corporate firms. And why wouldn’t it be? It helps businesses avoid a government audit. That said, payroll taxes don’t just revolve around recording employees’ income.
It is the dilemma that troubles companies who want to make sure they get the correct numbers when it comes to payroll taxes. Remember, HMRC deems the employment and payroll taxes mandatory for every company.
And if you fail to file the correct payroll taxes on time, you will be subject to complicated penalties and interests. Here are some of the guidelines that can help you understand payroll taxes:
Payroll Choices for Companies
If you are planning to expand and hire new employees, you will have two payroll options in the UK You can, of course, take care of the payroll through dedicated software and report the vital data to HMRC. The software should be compatible with gathering and recording employees’ information.
In addition, it should be able to deduct, compensate, and determine the payable amount to the HMRC. Simultaneously, you can calculate designated maternity pay and sick pay. You can, on the other hand, work with a tax specialist and handle payroll taxes. It means you will be able to comply with UK labor laws and PAYE standards.
List the Details: What You Must Record
It is true – different tax regulations might force you to follow different tax requirements. You should, however, compile essential information at all costs. The details might include:
- Employees’ names, national insurance number, and addresses
- The collective information about the paid salaries to the employees
- The payroll reporting from the start to the end of the year
- Added payments like benefits, contributions, and pension
- Amount of paid goods or services you offer to your employees as a substitute for money
- Employees’ expenses such as receipts
- Sick, paternity, or maternity pay
In simple terms, record transactions that might have a monetary value. It will, after all, affect employees’ income the tax you will have to withhold.
When You Should Use P45 Form
For every new employee you hire, you will need to get a P45 form from a particular employee’s last employer. And if a specific employee doesn’t have a previous employer, it will be your responsibility to fill out the HMRC checklist and comply with the tax code.
It is vital to understand that the P45 is part of the pay-as-you-earn (PAYE) initiative. It’s where you practically withheld National Insurance Contributions (NIC) and income tax from an employees’ salary and pay it to HMRC (Her Majesty’s Revenue and Customs).
Find Out About the Entitlement Terms
Yes, companies need to set up termination or entitlement terms. It means the employment contract should clearly state termination and entitlement terms. So, before you mindlessly jump to payroll taxes, take into account that employers are legally obligated to serve a termination notice to an employee.
Apart from statutory notice and employee’s contract, you should also be aware of any redundancies that might turn statutory requirements on severance pay obsolete. In fact, employees have the right to SRP so long as they’ve been working for more than two years.
Final Thoughts: What about Brexit?
Sure, EU Case Law inevitably influences UK employment law. And as the future of Brexit hangs in the balance, companies should still interpret and calculate payroll taxes as per current regulations.
We can help with all of your business and personal tax and financial planning needs. For a strategic review of your finances, please contact us.
Disclaimer: We don’t take any responsibility for actions taken based on above information. Please speak to our financial advisor if you need more information. This guide was written specifically for Smart Accounting clients. Some of the information contained in this guide might not be applicable if you do not have a business managed by Smart Accounting. By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details are correct at time of writing.