At Ember, we understand that managing payroll can seem like a daunting and complex task for businesses of all sizes. One essential aspect of payroll is the Pay As You Earn (PAYE) system, which plays a vital role in ensuring accurate tax deductions from employee salaries.
In this article, we will explore what PAYE is, how it works, and provide you with a comprehensive understanding of payroll processes. By the end, you'll be equipped with the knowledge to navigate PAYE with confidence.
What is PAYE?
PAYE, or Pay As You Earn, is a system introduced by tax authorities to collect income tax and National Insurance Contributions (NICs) directly from employees' salaries. As an employer, it is your responsibility to deduct the appropriate amount from your employees' wages and remit it to the tax authorities on their behalf.
How does PAYE work?
Registering as an employer: When you hire your first employee, you must register as an employer with Her Majesty's Revenue and Customs (HMRC) in the United Kingdom. You can do that via the following link or alternatively you can reach out to our team via Intercom and we will be happy to assist.
Obtaining employee information: Collect relevant information from each employee, including their National Insurance Number, tax code, and other employment details. This information helps determine the correct amount of tax and NICs to be deducted.
Calculating deductions: Using the information provided by your employees and their tax codes, Ember will calculate the correct amount of tax and NICs to deduct from their salaries.
Payroll frequency: In Ember, this is setup to file on a monthly basis and you can even automate the monthly pay run filing to HMRC. That's one less thing for you to worry about!
Deduction and payment: You can view how much tax & NIC's are owed to HMRC by navigating to the "Taxes" tab within Ember. You will need to make this payment to HMRC via bank transfer. The bank details, including your unique reference code, can be found by clicking into the "PAYE Payment" tile in the Taxes tab
Employee payslips: Once the monthly payrun is filed, each employee will be provided with a detailed payslip automatically that outlines their gross pay, deductions, and net pay. This helps employees understand their salary breakdown and ensures transparency.
At Ember, we are committed to helping you navigate the complexities of payroll. If you have any questions or need further assistance, please don't hesitate to reach out to our expert team.