Failing to comply with obligations for Pay As Your Earn (PAYE) and Real Time Information (RTI) or meeting the deadline can result in penalties.
To prevent receiving any penalties, it is important that employers understand what is required and ensure deadlines are met.
Calculating Deductions
When an employee is paid, employers need to record their pay on their payroll and calculate deductions for PAYE and employees' National Insurance. If the employee has a student loan, then further deductions need to be made. Most payroll software will automatically make deductions from an employee, however, it is crucial that the correct information has been input for each employee. To make sure an employee's National Insurance deductions are correct it is important to make sure that the employee's tax code is correct and that they have been given the correct National Insurance category. The payroll software will also be able to calculate an employer's National Insurance contributions if the correct letter has been used.
Produce a payslip
Employees and workers have a statutory right to payslips and they should be given on or before their payday. Most payroll software will produce payslips for an employer to give to their employees, in either paper or digital format.
A payslip has to contain the following information
Gross pay
Deductions, such as tax, pensions and Nation Insurance
Net pay
If pay is dependent on hours worked, then the number of hours worked in the pay period
Real-Time Information
Real-Time Information requires employers to report employees' pay and deduction 'at or before' the time that a payment has been made. This can be done through payroll software, and employers should make sure not to miss this vital step.
Late Reporting Penalties
If an employer is late when filing FPS in more than one tax month within the tax year, then HMRC will charge a penalty. The penalty given will depend on how many employees the employer has.
Number of employees | Monthly Penalty |
|---|---|
1 to 9 | £100 |
10 to 49 | £200 |
50 to 249 | £300 |
250 or above | £400 |
Penalties are charged each quarter and should be paid within 30 days.
Paying PAYE
The are many different ways that employers can pay PAYE. These include direct debit, online banking, using a debit or corporate credit card, at a bank or building society. From 19 September, employers will be able to set up a recurring direct debit to their PAYE.
Penalties can also be charged if HMRC is paid to HMRC late for more than one month. The penalty charge will depend on the number of defaults in the tax year. The charge is then in the form of a percentage, which is based on the amount that is late for the tax month in question. The first month in the tax year, where PAYE was paid late is not treated as a default.
Numbers of defaults in a tax year | Penalty percentage |
|---|---|
1 to 3 | 1% |
4 to 6 | 2% |
7 to 9 | 3% |
10 or 11 | 4% |
Penalties are charged each quarter and should be paid within 30 days.