Employed or Self-employed?
When you engage someone to do work for you first of all you have to decide whether this person is an employee or self-employed. It is up to you to get this right and failure to do so may lead to you having to settle liabilities in tax and National Insurance that you should have deducted from your employee’s pay.
Our Self-employed or Employed guide will take you through some principal factors that you need to take into account when determining the employment status.
Registering as an employer
There is a requirement to register as an employer when you take on employees even if the earnings are small and do not reach tax or national insurance minimum. This also applies if the employee is only going to be working for you for a short period of time.
To notify HM Revenue & Customs it is best to call the New Employers Helpline on 0845 607 0143.
Once registered as a new employer you will receive a New Employer’s pack with guidelines on operating PAYE, National Insurance, Statutory Sick Pay, Statutory Maternity Pay, Statutory adoption pay, including a number of forms and worksheets. You will also receive a set of tax tables to help you calculate the amount of tax and NI due.
There are a few options for calculating the payments:
• Manually using the tax tables
• Purchase payroll software
• Appoint an agent
PAYE Payments
The tax year for payroll runs from 5th April to the 6th April of the following year. The tax month ends on the 5th of each month. The tax and NI should be paid to HMRC by the 19th of the month following payment to your employee. Employers whose total monthly average payments are less than £1,500 can request to pay quarterly instead, i.e. by the 19th of July, October, January and April.
If you are paying electronically you have until the 22nd of the month following the payment to pay HMRC. Where the payment falls on a weekend or a bank holiday you have to ensure that the payment is received by the previous working day.
Electronic filing
Almost all employers are now required to file their annual returns online (forms P35 and P14s). Your Employer Annual Return must reach HMRC by 19 May after the tax year to which the return applies. You may be charged a penalty if your return is received later than this.
