Like most aspects of business finances, payroll can be confusing. Do you need to set up a system or should you look into payroll services for small businesses? What is PAYE – and is registering a legal requirement?
If you feel like you’re stuck in a maze of numbers and regulations, you’re not alone. At Angel Bookkeeping & Payroll Services, we work with countless clients who aren’t familiar with the ins and outs of payroll, giving us plenty of experience with the most common FAQs, all of which we’ll answer in this article.
Ready to get to grips with payroll? Let’s get straight into it.
Do All Businesses Need a Payroll System?
As soon as you hire an employee in the UK, you need a payroll system. This applies to sole traders, limited companies, and partnerships, and the rule remains the same whether you have 1 or 1,000 employees.
If you don’t have any staff, you don’t need a payroll system – but you will need a bookkeeping system to ensure legal compliance.
Can I Run My Own Payroll in the UK?
Yes, it’s legal to set up your own payroll system in the UK. However, you’ll have to be vigilant in ensuring that you follow all of the legal requirements and tax regulations for total compliance. If you DIY your payroll and make a mistake, this could lead to hefty fines and government penalties.
That’s why most businesses choose to hire professionals (like our lovely team at Angel Bookkeeping & Payroll Services) to take care of payroll on their behalf. This is far less time-consuming than setting up your own system and won’t put your business at risk of non-compliance, making it the smart choice for business owners.
At Angel Bookkeeping, we can set up BrightPay payroll systems from scratch or work with your existing framework, creating a streamlined payroll process that follows UK laws and keeps your entire team happy.
What Is PAYE?
PAYE stands for Pay As You Earn. This is a government system that collects Income Tax and National Insurance (NI) payments every time your employees are paid (in comparison to a sole trader, for example, who is billed for income tax and NI on submission of their yearly Self Assessment).
PAYE deducts the correct percentage of tax before your employees receive their pay, making it simpler for your team to manage their money. This also helps your business stay tax-compliant with UK laws.
Who Needs to Register for PAYE?
As a business owner, you need to register for PAYE as soon as you hire an employee who ticks any of the following boxes:
- Is paid £123 or more a week
- Receives expenses and/or company benefits
- Is receiving a pension
- Has ever had another job
- Has received benefits including Incapacity Benefit, Jobseeker’s Allowance, or Employment and Support Allowance
This is outlined by HM Revenue and Customs (HMRC), the financial sector of the government that monitors tax (among other roles).
If you need to register for PAYE but you don’t know how, get in touch with our team and we’ll be happy to help as part of our payroll services for small businesses.
What Are the Basics Needed for a Payroll System?
Setting up a payroll system requires full compliance with government regulations. Some of the basic steps to get started include:
- Registering as an employer with HMRC
- Registering for PAYE
- Adding your employees to your payroll system
- Creating a record-keeping system to track employee leave, taxable expenses, and other key details
- Maintaining at least 3 years of records
- Paying HMRC any tax and NI contributions you owe
At Angel Bookkeeping & Payroll Services, we can implement a fully functioning payroll system for your business so that you don’t have to worry. Alongside these must-have steps, we’ll also take care of your payroll tasks, including:
- Recording employee pay
- Calculating tax and NI deductions
- Calculating your NI contributions as an employer
- Creating payslips for your employees
- Reporting your payroll information to HMRC
- Calculation pension
- Calculating statutory payments like maternity, paternity and sick pay
Whether you’re a start-up or an established business, our digital payroll services make paying your employees a breeze.
Why Use The Cloud For a Payroll System?
We’re big advocates for cloud-based payroll systems like Brightpay at Angel Bookkeeping & Payroll Services.
To begin with, these digital systems reduce the amount of paper in your business, cutting down on time-consuming filing and saving office space. You and your team can access your payroll systems on the go, too, for easier management and remote edits.
Using safe and secure platforms – like BrightPay payroll software – also enables easier collaboration between your business and your bookkeepers.
When we use cloud-based payroll set-ups, for example, you can log into the system from your office while we log in from ours, making it easier to share information simultaneously.
It’s simpler to store digital records of your payroll, too. If HMRC audits you, we can prove your PAYE compliance through our cloud software and bookkeeping.
In short? It’s the no-brainer option for a flexible and efficient payroll system.
How Do I Pay Myself As a Business Owner?
As a business owner, you’ll only be paid via your payroll system if you’re classified as an employee of the business. This is applicable if you’re the owner of a Limited Company and you take a salary.
For sole traders and partnerships, you’ll pay yourself via direct draws from your business income. You’ll then file a Self Assessment separately to your payroll system, and pay income tax and NI at the end of every tax year.
What Are Payroll Services for Small Businesses?
Payroll services for small businesses help you manage employee payments, deduct taxes, and keep records. Essentially, our team cover all of the tasks mentioned in this article – and more! This leaves you with more time to get on with running your business, safe in the knowledge that your PAYE compliance is in good hands.
Want to learn more about our Brightpay payroll services or start working with our team? Reach out to us today.