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Payroll compliance refers to ensuring that your business meets all legal requirements related to employee wages, benefits, tax deductions, and reporting.

 

This includes complying with tax laws, employment laws, and regulations set out by government authorities such as HMRC in the UK. It’s a vital part of business operations, ensuring that employees are paid accurately and on time while avoiding penalties for non-compliance.

'We offer expert payroll services, including accurate PAYE calculations, RTI submissions, National Minimum Wage compliance, and more.'

UNDERSTANDING UK PAYROLL COMPLIANCE:

Key Aspects of Payroll Compliance

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PAYE (Pay As You Earn) System:

  • The PAYE system is the method by which income tax and National Insurance contributions (NICs) are automatically deducted from an employee's wages and paid to HMRC.

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  • Employers must ensure that they correctly calculate tax and NICs for each employee based on their earnings and tax code.

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  • Real-Time Information (RTI): Employers must report payroll information to HMRC every time they pay an employee, which is done through RTI submissions. This provides HMRC with real-time updates on tax and NICs payments.

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Tax Codes and Personal Allowances:

  • It’s essential to apply the correct tax code for each employee. The tax code indicates the employee’s tax-free personal allowance and helps to calculate how much tax needs to be deducted from their salary.

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  • Businesses must ensure that they keep up with any changes to employees’ tax codes, such as when they move into a different tax band or when allowances change.​

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National Minimum Wage (NMW) and National Living Wage (NLW) Compliance:

  • Employers must pay employees at least the National Minimum Wage or National Living Wage depending on their age and employment status.

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  • It’s critical for businesses to regularly check the rates for NMW and NLW, as they can change each year. Non-compliance with these wage laws can result in severe penalties and reputational damage.​

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Employee Benefits and Deductions:

  • Employers may also be required to manage deductions for various employee benefits, including pension contributions, student loan repayments, and salary sacrifice schemes.

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  • It’s important that these deductions are accurately calculated, reported, and remitted to the appropriate authorities on time to stay compliant.​

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Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP), and Other Statutory Leave:

  • Employers must ensure that they correctly handle payments for statutory leave such as sick leave, maternity leave, and paternity leave.

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  • These payments are subject to specific rules and thresholds, and businesses must ensure that they comply with the required legal frameworks when calculating and making these payments.

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Filing Payroll Records and Returns:

  • Employers are required to submit monthly or quarterly payroll information to HMRC. This includes payroll reports, P60s, and P11D forms for tax year-end reporting.

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  • Businesses must keep detailed payroll records, including employee pay rates, tax deductions, and benefit information, for at least 3 years in case HMRC needs to audit the payroll records.

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Why Payroll Compliance Matters:

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  1. Legal Requirement

    • Payroll compliance is not just a best practice; it’s a legal obligation. Failing to comply with tax laws, minimum wage laws, and other employment regulations can lead to heavy fines, legal action, and reputational damage.

  2. Avoiding Penalties

    • Incorrect or late submissions to HMRC can result in penalties. These can be for failing to submit RTI reports on time, not paying the correct amount of tax or NICs, or not adhering to the National Minimum Wage laws.

    • By ensuring payroll is compliant and timely, businesses can avoid costly mistakes and penalties.

  3. Employee Trust and Satisfaction

    • Ensuring employees are paid correctly and on time helps build trust and satisfaction. Employees depend on their salaries and benefits, and payroll compliance is essential for maintaining good employer-employee relations.

    • Incorrect payments, late wages, or miscalculated tax deductions can lead to dissatisfaction and even legal disputes.

  4. Audit Readiness

    • Payroll compliance helps ensure your business is always prepared for audits by HMRC. Well-organized and accurate payroll records make it easier to respond to inquiries and requests for documentation during audits.

    • Accurate reporting also reduces the risk of errors or discrepancies being flagged during an audit.

How Can We Help?

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We understand that managing payroll compliance can be complex and time-consuming. Our payroll services ensure that your business stays compliant with all relevant regulations, reduces the risk of penalties, and helps you focus on running your business. Here’s how we can help:

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  • Accurate PAYE and NIC Calculations: We ensure that tax and National Insurance contributions are accurately calculated for every employee based on their earnings and tax code.

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  • Our team stays up-to-date with changing tax rates and thresholds to ensure compliance.

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  • RTI Submissions: We handle Real-Time Information (RTI) submissions, ensuring that HMRC receives payroll information in real-time, as required by law.

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  • This includes submitting monthly or quarterly payroll reports and handling year-end submissions like P60s and P11D forms.

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  • National Minimum Wage and Living Wage Compliance: We ensure your business is always compliant with the National Minimum Wage and National Living Wage requirements, so you avoid penalties for underpayment.

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  • Our team helps you monitor wage changes and adjusts your payroll to comply with any updates in wage laws.

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  • Employee Benefits and Deductions: We manage employee benefit deductions, including pension contributions, student loan repayments, and salary sacrifice arrangements, ensuring they’re processed correctly and on time.

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  • We also provide detailed reports on these deductions to keep you informed of the impact on both employees and the business.

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  • Statutory Leave and Sick Pay: We manage statutory sick pay (SSP), maternity pay (SMP), and paternity pay (SPP), ensuring that employees are paid the correct amount while on statutory leave, and that your business stays compliant with employment laws.

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  • Timely Filing of Payroll Returns: We ensure that all required payroll returns are filed with HMRC in a timely manner, including P45s, P60s, and P11D forms, so that your business avoids late filing penalties.

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  • Our team handles all end-of-year reporting and ensures that the correct information is submitted to HMRC.​

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  • Ongoing Support and Advice: We provide continuous support and guidance to ensure your payroll systems remain compliant with evolving tax laws and employment regulations.

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  • Our team is always available to answer questions, resolve payroll-related issues, and offer advice on best practices for payroll management.

  • What is self-assessment?
    Self-assessment is a system or regime by which Her Majesty’s Revenue & Customs (HMRC) assesses and collects direct tax in the UK.
  • Should I complete a self-assessment tax return?
    Most people who pay income tax in the UK do not have to complete self-assessment tax returns. These are primarily employees whose tax is deducted at source under the Pay as you Earn system (PAYE). Self-assessment therefore applies to individuals such as the self-employed (sole traders) who earn in excess of £1,000, landlords that receive rental property income, individuals who receive income from savings, investments and dividends, foreign income, income from tips and commission and any other type of untaxed earnings.
  • When are self-assessment tax returns due?
    The UK tax year starts on 6 April each year and ends on 5 April of the following year. Self assessment returns are due on the 31 January following the end of the tax year. For individuals who wish to submit paper returns, the deadline is 31 October following the end of the tax year.
  • What are payments on account?
    Payments on account are amounts that some individuals are required to pay towards their estimated tax liability for the current tax year. They are calculated based on the previous tax years liability and are paid in two equal instalments of 50% each on the 31st January and the 31st July. These amounts are then deducted from the final liability for the year and a balance payment is usually made, together with a first payment on account for the following tax year.
  • How do I get the ball rolling?
    As a starting point, you would need to register with HMRC in order to receive your 10 digit Unique Tax Payer Reference number (UTR). This number will enable you to submit your tax returns online by the 31st January deadline. If you are completing your own tax return, you would need to create an online account with HMRC once you receive your UTR number. Alternatively, if you need to help and support with getting your tax affairs complete and up to date then please get in touch for your free consultation.
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