Setting up a payroll

Produced by Tolley in association with

Employment Tax

Guidance

It may be stating the obvious, but to be an employer signifies that there are employees (or at least one employee). Depending on the employee(s) earnings, the employer may have to make certain statutory deductions from salaries and wages. Statutory deductions include income tax, national insurance contributions (NIC), student loan deductions (SLD) and attachment of earnings orders (AEO). These statutory deductions are all made via the payroll. The collection system for tax and NIC is called pay as you earn (PAYE).

Registering with HMRC

Even though there may only be one employee, an employer needs to register with HMRC if the employee(s):

•
has another job
•
is receiving a pension (state or occupational)
•
has earnings equal to or more than the lower earnings limit (LEL) for national insurance
•
is receiving benefits in kind from the employer

Registration needs to be undertaken before the first payday. The registration process can take up to 30 days and registration cannot be made more than two months before employees are first paid. The timescale for registering

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