If you have been running your own business as a sole trader, you will be used to drawing your earnings from the business and accounting for your profits under self-assessment. However, if your business becomes incorporated, you will probably be employed by the company and will need to start operating a payroll system. Alternatively, you might be running a payroll for the first time because your business has expanded and you are taking on an employee.
Do I need to register for PAYE?
Not necessarily. You only have to register for PAYE if:
- You are paying someone at or above the PAYE threshold.
- You are paying someone at or above the NI Lower Earnings Limit.
- Your employee has another job or is receiving a pension.
- You are giving an employee benefits.
If you are unsure as to whether you need to register as an employer with HMRC, check the Business Link website for more information or ask your accountant.
Payroll software
Although it is not compulsory to keep your payroll records on computer, it is necessary to submit various payroll forms to HMRC online and therefore most businesses choose to do so.
HMRC’s Basic PAYE Tools is downloadable free from the Business Link website. This programme allows you to record your employees’ details and calculate the PAYE and NI deductions and is suited to businesses with up to nine employees. You need to have Adobe Reader and Flash Player installed to make this work, but these can be downloaded free from the Adobe website.
Basic PAYE Tools is limited, but does allow you to submit forms directly to HMRC.
However, if you are looking for something a little more sophisticated, the HMRC website lists approved payroll programmes, including a number of free versions - 12Pay, IRIS, Keytime Objective Ltd and Payroo Ltd.
All these are fully functional and free for up to ten employees, whilst Payroo is funded by advertising and allows up to 5,000 employees. Some of these are downloadable whilst others are web-based. These systems allow online filing and printing of payslips and other reports.
Where can I get help?
The HMRC and Business Link websites have lots of information to help get you started, setting up your payroll system and operating it correctly. However, if this all sounds too daunting, there are other options. You can outsource your payroll to a third party. Your accountant should be able to provide this service or recommend a payroll bureau.
