PAYE & NI

At Andertons we believe: Why pay more tax and NI contributions than you need to? We can help you to minimise your liabilities, while ensuring that you comply with your obligations. Just view our PAYE and NI guides to find out more.

An Introduction to PAYE

Whether an individual is an employee or self-employed in a particular situation is a question of fact depending on the terms under which he or she works. When you engage someone to do work for you, you have to decide whether or not to apply the PAYE rules. It is up to you to get it right or suffer the consequences.

In certain areas, HM Revenue & Customs has placed emphasis on reclassifying individuals claiming to be self employed. They issued a leaflet, IR56, Employed or Self-employed? Setting out the guidelines of employment status in the form of questions. These cover the following principal factors:

The degree of control and supervision exercised over the individual's work

Whether services are performed mainly or wholly for one business

Where the duties are performed

Terms of pay, holiday time, pension arrangements, and other benefits

Whether the work has to be performed personally, or whether a substitute may be supplied

Provision of items of equipment

The financial risk and responsibility for loss undertaken by the individual

Please note: We strongly recommend that if you are in any doubt as to the status of an individual, ask HM Revenue & Customs to clarify the situation. Obtaining their approval will avoid the risk of you having to make a settlement of liabilities to tax or NI that you failed to deduct from the employee's remuneration.

Before establishing a PAYE system, it is necessary to notify the HM Revenue & Customs by telephoning the New Employers Helpline (0845 607 0143).

Upon registration, HM Revenue & Customs will send you guidelines on operating PAYE, national insurance, statutory sick pay, statutory maternity pay, statutory paternity pay and statutory adoption pay, including a number of forms with which to operate the PAYE and NI systems. (See checklist below).

To help you calculate the amount of tax and NI due, HM Revenue & Customs will supply you with sets of tax tables. By referring to these, and an employee's tax code, you will be able to calculate the amount of salary that is not subject to tax. The difference between this figure and the gross amount paid is the employee's taxable pay. The tax can then be calculated by reference to another set of tables. The employer's and employee's NI is calculated by reference to the employee's gross pay in conjunction with a third set of tables. Note, however, several 'benefits' are also subject to NI even where the tax is dealt with on a different basis.

The tax and NI should be paid to HM Revenue & Customs by 19th of the month following payment. Employers whose average monthly payments of PAYE and NI are less than £1,500 in total are allowed to pay quarterly rather than monthly (i.e. by 19th of July, October, January, and April). This should be requested using form P31. See also electronic payment of PAYE.

PAYE checklist

Have you contacted the New Employers Helpline? 

Have you received the following?

Notice of your PAYE and Accounts Office reference numbers 

Tables A, SR + B to D, and NIC tables 

Day-to-day payroll - Employer's Help Book (E13) 

Further Guide to PAYE and NICs (CWG2) 

Expenses and Benefits - A Tax Guide (480) 

P11D Guide 

Class 1A NICs on Benefits In Kind - A Guide for employers (CWG5) 

Class 1A NICs on Cars and Fuel - Employers Manual (CA33)