Your Finance Team


PAYE Advice Edinburgh

Edinburgh Accountants Allsquare will create your company Pay As You Earn (PAYE) system to allow your employee to contribute to income tax & national insurance.

If you are running a business and employing one or more people to help you, you’ll need to know about Pay As You Earn (PAYE). PAYE is the method by which you, as an employer, collect tax from your employees when you pay them, add the employer’s National Insurance that you need to pay, and send the payment each month to Her Majesty’s Revenue and Customs (HMRC).

Payments and deductions

Payments made by you to your staff will consist of salary or wages, any bonuses you give them, and any extra payments that they have earned. However, the payment may also consist of statutory maternity pay or sick pay.

You will need to deduct income tax and National Insurance from your employees’ pay and you may also need to deduct repayments for student loans or pension savings. If the employee earns over £155 a week, you need to pay Employer’s National Insurance for them.

If the employee’s payment includes sick pay or maternity pay, you can reclaim these. The problem is, that all of this needs to be done on or before the day you pay people. Most employers find that they have to resort to a payroll system because PAYE is just too complicated to be done manually.

There is one small piece of good news for small employers – if you are paying out less than £1,500 a month in wages, you can apply to HMRC to pay quarterly. However, that quarterly date rolls around very quickly, and many small businesses actually prefer the certainty of paying monthly.

Year End

At the end of the year, you have to submit a set of reports. At this time, you have to let HMRC know whether you’ve paid any benefits, such as travel allowances, meal vouchers and so on. For each employee that has received any benefit, you must submit a P11D form to HMRC, detailing exactly what the benefit consisted of, and its financial worth.

This information is used to calculate the amount of Class 1A National Insurance that you have to pay, based on the benefits that you have provided to your staff. Staff will also usually pay tax on these benefits, generally through an adjustment to their tax code.

Additionally, you need to issue a P60 to each employee at the end of the year (5th April). This tells them how much they earned the previous year and what tax and national insurance you deducted.

It’s then time to start the preparations for the next tax year, which begins on 6 April. There are nearly always changes to implement, so it’s important to keep up to date with what this means for your PAYE accounting.

There are many complications to the PAYE picture, and most business people use the services of an accountant to help them cope with it all. You should choose an accountant who is up to date, as well as friendly and supportive – more of a partner than just a service provider.

Try talking to the people at Allsquare who can provide help and advice with payroll, PAYE issues and recent tax changes. It’s wise to do this sooner rather than later because this is one area where HRMC insists on promptness.