Employer Helpbook E13(2013) Day-to-day payroll

Transcription

1 Empoyer Hepbook E13(2013) Day-to-day payro This guide is intended for the very sma number of empoyers who are exempt from the requirement to fie their starter and eaver information and simiar pension information onine. Starter and eaver and simiar pension information incude forms: P45 Part 1 Detais of an empoyee eaving P45 Part 3 New empoyee detais P46 Empoyee without a form P45 P46(Pen) Notification of pension starting P46(Expat) Empoyee seconded to work in the UK (ony to be used where empoyees have been seconded to work in the UK whist remaining empoyed by an overseas empoyer). Use from 6 Apri 2013 Updated from 1 May 2013

2 Hep and guidance Hep and guidance is avaiabe from the foowing sources. Rea Time Information (RTI) HMRC introduced Rea Time Information (RTI) in Apri Empoyers and pension providers send PAYE information to HMRC onine when they pay their empoyees, instead of yeary. For more information go to The internet For hep with payro go to htm For wider interactive business hep go to We offer free onine presentations (webinars) covering a range of payro topics. For more information go to Any page printed from the onine version of this hepbook is uncontroed and may not be the atest version. We recommend that you aways check you are referring to the atest onine version. Onine services For information and hep using our Onine Services go to For more hep contact the Onine Services Hepdesk by: emai hepdesk@ir-efie.gov.uk phone , or textphone Basic PAYE Toos The Basic PAYE Toos is software that you downoad onto your computer. It wi hep you run your payro throughout the year. It is designed for empoyers who have nine or fewer empoyees, and has been updated so that you can use it to cacuate payro deductions and then report payro information onine in rea time. Basic PAYE Toos wi: record your empoyees detais work out and record your empoyee s pay, tax, NICs and any Student Loan deductions every payday generate the payro data that you need to send to HMRC in rea time, incuding starter and eaver information produce an Empoyer payment record that works out how much you need to pay HMRC contain cacuators to hep you to work out statutory payments such as Statutory Sick Pay and Statutory Maternity Pay. Current users of HMRC s Basic PAYE Toos for traditiona PAYE shoud foow the specia guidance set out at Other customers can find further information and downoad the Basic PAYE Toos for rea time reporting from uk/payerti/getting-started/payro-system.htm Empoyer hepines Empoyer for ess than 3 years, phone Empoyer for 3 years or more, phone If you have a hearing or speech impairment and use a textphone, phone Empoyer hepbooks and forms Hepbooks and forms are avaiabe to downoad. Go to Yr aith Gymraeg I awrwytho ffurfenni a yfrynnau cymorth Cymraeg, ewch i htm#2 a diyn y cysytiad i Becyn y Cyfogwr. Os, yn eithriado, nad oes gennych gysytiad i r rhyngrwyd, cysytwch â r Ganofan Gyswt Cymraeg ar Forms and guidance in Braie, arge print and audio For detais of empoyer forms and guidance in Braie, arge print or audio, phone the Empoyer Orderine on and ask to speak to the Customer Service Team. Business Education and Support Team We have a wide range of free educationa products to hep and support businesses. For more information go to index.htm or phone Empoyer Buetin onine Empoyer Buetins contain information and news for empoyers. We pubish these severa times a year. Go to Empoyer emai aerts We strongy recommend that you register to receive empoyer emais to prompt and direct you to: each new edition or news about the Basic PAYE Toos the Empoyer Buetin important new information. To register, go to forms-pubications/register.htm HM Revenue & Customs (HMRC) If you have a query about your PAYE scheme: phone the Empoyer Hepine on , or write to: HM Revenue & Customs Nationa Insurance Contributions & Empoyer Office BP4009 Chiingham House Benton Park View NEWCASTLE NE98 1ZZ Pease te us your empoyer PAYE reference when you contact us. You wi find it on correspondence from HMRC. Your rights and obigations Your Charter expains what you can expect from us and what we expect from you. For more information go to

3 Contents Introduction 2 Part 1 When must I prepare and maintain a form P11 Deductions Working Sheet? 3 Part 2 Working out and recording PAYE on form P11 3 Tax codes and how to use them 3 Cacuating tax 3 Pay Adjustment Tabes, Tabes A 3 Taxabe Pay Tabes, Cacuator Method 3 Taxabe Pay Tabes, Manua Method 3 When to use a code on a week 1/month 1 basis 4 How to use a code on a week 1/month 1 basis 4 Cacuating the tota pay adjustment to date 4 Exampes 5 Fiing in the PAYE Income Tax section on form P11 6 Unusua circumstances 9 Part 3 Working out and recording Nationa Insurance contributions (NICs) on form P11 9 How Cass 1 NICs are made up 9 How to work out NICs 9 Cacuating NICs 10 NICs Tabes 10 Fiing in a form P11 NICs 13 Part 4 Making payments to HM Revenue & Customs (HMRC) 15 When to make payment 15 How the payments are cacuated 16 How to make a payment to HMRC 16 How to appy for funding in respect of tax refunds and statutory payments 17 Payments during a trade dispute 17 Exampe of P32 (extract) 18 Exampe of paysip P30B 18 Part 5 Taking on a new empoyee incuding someone who has worked for you before 19 Who to treat as an empoyee 19 Right to work checks 19 Nationa Insurance numbers 19 A new empoyee gives you a form P45 19 A new empoyee doesn t give you a form P45 22 Empoyee gives you a form P45 after the first payday 24 Existing empoyee gives you a form P45 25 Taking on a new empoyee - for one week or ess 25 Paying a pension to a retired empoyee or to a dependant of a deceased empoyee 25 Tracing Nationa Insurance numbers 25 Part 6 What you have to do when an empoyee eaves 26 Which forms you have to compete 26 Exampe of a competed form P45 27 Other points to note 27 Part 7 Empoyee s tax code changes in the tax year 28 Part 8 Changes that may affect an empoyee s NICs 28 An empoyee reaches age An empoyee egay changes their recorded gender 29 A married woman or widow who is entited to pay reduced rate NICs 29 An empoyee joins or eaves your pension scheme 29 An empoyee has more than one job 29 An empoyee becomes a director of your company 30 An empoyee goes abroad to work 30 An empoyee reaches or is over State Pension age 30 Which NICs tabes to use 31 An empoyee dies 32 Recacuating NICs because of a change in circumstances or an error 32 Underpayments of NICs 32 Part 9 Student Loan deductions 33 Start Notice, form SL1 33 New empoyee, forms P45 and P46 33 Working out and paying over Student Loan deductions 33 Stop notification 33 Where to get more hep and advice 33 1

4 Introduction This hepbook is intended for the very sma number of empoyers who are exempt from the requirement to fie their starter and eaver information and simiar pension information onine. Starter and eaver information and simiar pension information incude forms: P45 Part 1 Detais of an empoyee eaving P45 Part 3 New empoyee detais P46 Empoyee without a form P45 P46(Pen) Notification of pension starting P46(Expat) Empoyee seconded to work in the UK (ony to be used where empoyees have been seconded to work in the UK whist remaining empoyed by an overseas empoyer). Ony a very sma number of empoyers are exempt from the requirement to fie their starter and eaver information and simiar pension information onine. Even if you are exempt (see beow) you can sti choose to fie onine. This woud mean you fiing your information in rea time. More information on fiing in rea time can be found in the hep and guidance section at the front of this book. Many exempt empoyers aready do so because of the greater speed and convenience it offers. See the section Onine fiing benefits and getting started opposite to find out more. Who can fie their starter and eaver information and simiar pension information either onine or on paper? Ony the foowing empoyers have the option of fiing their starter/eaver/pension information either onine or on paper. a) Practising members of reigious societies or orders whose beiefs are incompatibe with the use of eectronic methods of communication. b) Empoyers who empoy someone to provide domestic or persona care or support services at or from the empoyer s home. The foowing conditions must be met: the care or support services must be provided to the empoyer or a member of their famiy the recipient of the services must have a physica or menta disabiity, or be edery or infirm the empoyer cannot have received a tax-free payment in respect of onine fiing in the preceding three years the empoyer must fie their returns themseves and not have someone ese (such as a reative or accountant) fie them on their behaf. If you are in either category and want to fie your starter/eaver/pension information on paper, you must write to the HMRC Customer Operations Empoyer Office (you can find the address on the Hep and guidance page) to te them why you think you shoud be exempt from fiing onine. We can then update our records so that you wi avoid a penaty notice for not fiing your returns onine. Who must fie their starter and eaver information and simiar pension information onine? A empoyers are required to fie this information onine uness they are exempt. If you do not fie your information onine when required to do so we may charge you a penaty. Onine fiing benefits and getting started Onine fiing is faster, easier, more secure and more reiabe than fiing using paper forms. You can aso use the onine service to view detais of your empoyers annua return, payments and other information for exampe, interest and penaties. So even if you re one of the few empoyers with the option to continue fiing on paper, we sti recommend that you move to onine fiing. We provide a range of hep and guidance to enabe you to fie onine. For an overview of what is invoved in onine fiing go to using-paye-onine.htm Basic PAYE Toos If you choose to fie onine you wi have to send your information to HMRC in rea time. You woud need to do this by using either a payro software package (some of which can be downoaded for free) or the Basic PAYE Toos which can be downoaded from HMRC s website. For more information go to Topics covered in this hepbook The guidance in this hepbook wi hep you to: decide when you must compete a form P11 Deductions Working Sheet (or equivaent record) work out how much tax and Nationa Insurance contributions (NICs) you need to deduct when you make a payment of wages or saary to an empoyee, uness the empoyee is a director (for hep on working out NICs for a director, see the CA44 Nationa Insurance for Company Directors) fi in a P11 Deductions Working Sheet fi in a P11 Deductions Working Sheet if you take on a new empoyee pay over tax and NICs to HMRC take the right action when an empoyee eaves change an empoyee s tax code identify the correct rate of NICs if there is a change in an empoyee s circumstances make Student Loan deductions. If your empoyee: is sick, see the E14(2013) Empoyer Hepbook for Statutory Sick Pay tes you they or their wife or partner are pregnant, see the E15(2013) Empoyer Hepbook for Statutory Maternity Pay tes you that they, or their spouse or partner, are adopting a chid, see the E16(2013) Empoyer Hepbook for Statutory Adoption Pay tes you that their wife or partner is pregnant or that their spouse or partner are adopting a chid, see the E19(2013) Empoyer Hepbook for Ordinary and Additiona Statutory Paternity Pay. If your empoyee asks you about Payro Giving: phone the Charities Hepine on go to see the CWG2(2013) Empoyer Further Guide to PAYE and NICs. Regiona Empoyer NICs Hoiday for New Businesses If you set up a new business on or after 22 June 2010 and no ater than 5 September 2013 you can find information about the Regiona Empoyer NICs Hoiday onine. Go to 2

5 Part 1 When must I prepare and maintain a form P11 Deductions Working Sheet? You must prepare and maintain a form P11 Deductions Working Sheet (or equivaent record) when either: you pay your empoyee 109 or more in any *week (NICs weeky Lower Earnings Limit) 473 or more in any *month (NICs monthy Lower Earnings Limit) *If your pay period is other than weeky or monthy pease see the CWG2(2013) Empoyer Further Guide to PAYE and NICs. we have sent you a tax code for your empoyee you are required to operate a tax code taken from your empoyee s P45, or you have paid your empoyee and you are required to operate tax code BR or 0T in accordance with the P46 procedures detaied on page 23. If an empoyee has more than one period of empoyment with you in the same tax year, use a new P11 Deductions Working Sheet for each period of empoyment. If you are not required to maintain a form P11 Deductions Working Sheet, you must keep a record of the empoyee s name, address and the amount of wages paid each pay period, for exampe, weeky/monthy/four-weeky. Part 2 Working out and recording PAYE on form P11 Tax codes and how to use them An empoyee s tax code refects the tax aowances due against that empoyee s pay. You work out the tax due by using the empoyee s tax code and the Tax Tabes to find out how much to deduct from, or refund to, that empoyee on each payday. Codes issued by HM Revenue & Customs We may send any one of the foowing codes to you for an empoyee: a code of one or more numbers foowed by the etter L, P, T, or Y, for exampe, 345L, 456Y, 567P, 0T. This is known as a suffix code. The etter shows how the code shoud be adjusted to take account of any Budget changes a code starting with either the etter D foowed by a number, for exampe D0; this is known as a D code and means that the whoe of the empoyee s pay shoud be taxed at the higher rate, or K foowed by one to four numbers, for exampe, K123; this is known as a K code and enabes additiona tax (for benefits for exampe) to be deducted from the empoyee s pay a code which is etters ony, BR or NT BR means that tax wi be deducted at the basic rate with no tax-free aowances NT means that no tax is to be deducted. Never ater an empoyee s tax code uness we te you to do so on a Coding Notice or on a form P9X or a form P7X. Cacuating tax To cacuate the amount of tax due on your empoyee s earnings use Pay Adjustment Tabes, Tabes A and a copy of either the: Taxabe Pay Tabes, Cacuator Method (use these tabes with a cacuator), or Taxabe Pay Tabes, Manua Method (use these tabes if you prefer not to use a cacuator). Pay Adjustment Tabes, Tabes A Use these tabes in a cases where an empoyee has a suffix code or K code. They wi enabe you to work out the empoyee s Tota pay adjustment to date on any payday. The Tota pay adjustment to date figure represents: in suffix code cases, the tota pay an empoyee may have free of tax, known as Free Pay in K code cases, the tota pay to be added to an empoyee s pay, known as Additiona Pay. To use the tabes you need to know the: empoyee s tax code, and tax week/month number covering the date of payment, see the charts on page 21. Taxabe Pay Tabes, Cacuator Method Use these tabes (Cacuator Tabes) together with your cacuator to work out the empoyee s Tota tax due to date on any payday. For suffix code and K code cases, you need to know the empoyee s Tota taxabe pay to date figure. The empoyee s Tota taxabe pay to date figure is: in suffix code cases, the tota pay to date minus the Free Pay according to Pay Adjustment Tabes, Tabes A in K code cases, the tota pay to date pus the Additiona Pay according to Pay Adjustment Tabes, Tabes A. Use the tabes in the booket to work out the PAYE tax deductions. To cacuate the PAYE tax deductions at the: basic rate for code BR cases, mutipy the whoe pay (rounded down to the nearest whoe pound) by the rate for code BR which is shown on pages 6 and 7 of the tabes. Pease note: code BR means there are no tax-free aowances. higher rate for D0 code cases, mutipy the whoe pay (rounded down to the nearest whoe pound) by the rate for the D0 code which is shown on page 10 of the tabes. additiona rate for D1 code cases, mutipy the whoe pay (rounded down to the nearest whoe pound) by that rate for the D1 code which is shown on page 11 of the tabes. Taxabe Pay Tabes, Manua Method These are aternative tabes (Manua Tabes) you can use to work out the empoyee s tax due if you prefer not to use a cacuator. 3

6 When to use a code on a week 1/month 1 basis You normay work out PAYE on a cumuative basis. This means you need to take into account an empoyee s previous pay and tax figures in the tax year to find out the tax to deduct from their pay. Sometimes, you may have to make deductions in a non-cumuative way. This is caed a week 1 or month 1 basis. You shoud use a code on a week 1/month 1 basis when: we add a week 1/month 1 marking to any code we te you to use you have a new empoyee and there is a week 1/month 1 tax code on their P45 you have a new empoyee and the instructions on page 23 of this hepbook te you to use the emergency code on a week 1/month 1 basis a weeky payday fas on 5 Apri or, in a eap year, on 4 or 5 Apri. If this occurs, see the CWG2(2013) Empoyer Further Guide to PAYE and NICs, under Week 53 payments. How to use a code on a week 1/month 1 basis Use the Pay Adjustment Tabes, Tabes A, for an empoyee on a week 1/month 1 code, paid weeky or monthy. Treat each payment you make to the empoyee separatey, you shoud ignore their previous pay and tax detais. Regardess of when the pay date is, turn to the page in the tabes for week 1 or month 1 to work out the empoyee s Pay adjustment to date figure. Use the guidance on pages 6 to 9 of this hepbook, appropriate to the code, to make the entries on form P11 or equivaent record. Cacuating the tota pay adjustment to date The tota pay adjustment to date figure represents: in suffix code cases, the Free Pay you deduct from an empoyee s tota gross pay to date in K code cases, the Additiona Pay you add to an empoyee s tota gross pay to date. The charts on page 21 of this hepbook show the periods covered by each tax week or month. When you have found which week or month number is appropriate for the pay date, turn to the page in the Pay Adjustment Tabes, Tabes A, for that particuar week or month number. If a pay date is 1 December, for exampe, the tabe shows the week number is 35, the month number is 8. A the exampes shown on page 5 use Week 35 to iustrate the procedures. 4

7 Exampes Empoyee s code is 500 or ess If the empoyee s code is 500 or ess, ook up the empoyee s code in the Pay Adjustment Tabes, Tabes A, coumn headed Code. The Tota pay adjustment to date figure is immediatey to the right. Week 35 code 320 The Tota pay adjustment to date figure at week 35 for an empoyee on code 320 is 2, Empoyee s code is 501 or more and does not divide exacty by Spit the code into units of 500 and the eftover baance. 2 Look up the eftover baance figure in the Pay Adjustment Tabes, Tabes A, coumn headed Code. The Tota pay adjustment to date for the eftover baance is immediatey to the right. 3 Mutipy the number of units of 500 by the figure given in the box marked * at the foot of the tax tabe page. 4 Add the amounts at steps 2 and 3 above together to find out the Tota pay adjustment to date figure. Week 35 code Code 1567 is spit into three units of 500 and a eftover baance of The Tota pay adjustment to date figure at week 35 for a eftover baance figure of 67 is The Tota pay adjustment to date figure for three units of 500 at week 35 is 3 x 3, = 10, This means that the Tota pay adjustment to date figure at week 35 for an empoyee on code 1567 is , = 10, Empoyee s code is 501 or more and divides exacty by Spit the code into units of 500 and treat the ast one as the eftover baance. 2 Look up the eftover baance figure in the Pay Adjustment Tabes, Tabes A, coumn headed Code. The Tota pay adjustment to date for the eftover baance figure is immediatey to the right. 3 Mutipy the number of other units of 500 by the figure given in the box marked * at the foot of the tax tabe page. 4 Add the amounts at steps 2 and 3 above together to find out the Tota pay adjustment to date figure. Week 35 code Code 1500 is spit into two units of 500 with one unit of 500 eft over. 2 The Tota pay adjustment to date figure at week 35 for the eftover unit of 500 is 3, The Tota pay adjustment to date figure for two units of 500 at week 35 is 2 x 3, = 6, This means that the Tota pay adjustment to date figure at week 35 for an empoyee on code 1500 is 3, , = 10,

8 Fiing in the PAYE Income Tax section on form P11 This section expains how to compete coumns 2 to 8, the PAYE Income Tax section of the form P11. PAYE Income Tax 1Week number Pay in the week or month incuding statutory payments (SSP/ SMP/OSPP/ ASPP/SAP) 2 p Tota pay to date 3 p Tota 'free pay' to date as shown by Tabes A * 4a p K codes ony Tota 'additiona pay' to date as shown by Tabes A 4b p Tota taxabe pay to date: coumn 3 minus coumn 4a or coumn 3 pus coumn 4b * 5 p Tota 'tax due' to date as shown by Cacuator Tabes or Tax Tabes B to D 6 p Tax due at end of current period Mark refunds 'R' 6a p K codes ony Reguatory imit: 50% of coumn 2 entry 6b p Tax deducted or refunded in the week or month Mark refunds 'R' 7 p K codes ony Tax not deducted owing to the Reguatory imit 8 p Coumn 2 is used to record the empoyee s gross pay for tax purposes. Gross pay for tax purposes incudes such things as overtime, bonus, commission, Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP), Ordinary Statutory Paternity Pay (OSPP), Additiona Statutory Paternity Pay (ASPP) and Statutory Adoption Pay (SAP) minus any authorised deductions under the net pay arrangements for superannuation contributions, or payro giving schemes. For more detais see the CWG2(2013) Empoyer Further Guide to PAYE and NICs, under gross pay. What you record in coumns 3 to 8 depends on the type of the empoyee s code and whether or not it is being used on a cumuative basis or on a week 1/month 1 basis. We te you what entries to make for each type of code in the tabes beow and on pages 7 to 9. Suffix code cases cumuative basis Add the amount you recorded in coumn 2 to the amount on the previous ine in coumn 3 to give the Tota pay Coumn 3 to date. Enter the Tota pay adjustment to date figure from the Pay Adjustment Tabes, Tabes A. This is the figure you Coumn 4a enter for Tota free pay to date. Take away the amount recorded in coumn 4a from the amount in coumn 3 to give the Tota taxabe pay to date. Coumn 5 Leave bank if the figure in coumn 4a is equa to or more than the figure in coumn 3. Coumn 6 Use the Cacuator Tabes, or ook up in the Manua Tabes, the amount shown in coumn 5 to find out the Tota tax due to date. If you have made no entry in coumn 5 enter Take the previous amount in coumn 6 and the amount you now enter in coumn 6, then subtract the ower amount away from the higher amount to give the Tax deducted or refunded in the week or month. Coumn 7 If the amount you now enter in coumn 6 is the higher amount, the difference is the tax to deduct from the empoyee. If the previous amount is the higher amount, the difference is the tax to refund and incude in the payment you make to the empoyee. Mark any refund entry R. Suffix code cases week 1/month 1 basis Coumn 3 Coumn 4a Coumn 5 Leave bank. Enter the Tota pay adjustment to date figure from week 1 or month 1 of the Pay Adjustment Tabes, Tabes A. This is the figure you enter for Tota free pay to date. Take away the amount recorded in coumn 4a from the amount in coumn 2 to give the Tota taxabe pay to date. Leave bank if the figure in coumn 4a is more than the figure in coumn 2. Coumn 6 Coumn 7 Leave bank. Use the Cacuator Tabes, or ook up in the Manua Tabes, the amount shown in coumn 5 to find the amount of tax to deduct. If there is no figure in coumn 5, no tax is due. 6

9 D code cases Coumn 3 Coumn 4a Coumn 5 Coumn 6 Coumn 7 Leave bank. Leave bank. Leave bank. Leave bank. Use the Cacuator Tabes or ook up in Tabes D at pages 10 and 11 of the Manua Tabes the amount shown in coumn 2 to find the amount of tax to deduct. D code cases cumuative basis Coumn 3 Add the amount you recorded in coumn 2 to the ast previous amount in coumn 3 to give the Tota pay to date. Coumn 4a Coumn 5 Coumn 6 Coumn 7 Leave bank. Leave bank. Use the Cacuator Tabes or ook up in the Manua Tabes the amount shown in coumn 3 to find the Tota tax due to date. Take the previous amount in coumn 6 and the amount you now enter in coumn 6. Take the ower amount away from the higher amount to give the Tax deducted or refunded in the week or month. If the amount you now enter in coumn 6 is the higher amount, the difference is the tax to deduct from the empoyee. If the previous amount is the higher amount, the difference is the tax to refund and incude in the payment you make to the empoyee. Mark any refund entry R. Code BR cases cumuative basis Add the amount you recorded in coumn 2 to the ast previous amount in coumn 3 to give the Tota pay Coumn 3 to date. Coumn 4a Coumn 5 Coumn 6 Coumn 7 Leave bank. Leave bank. Use the Cacuator Tabes or ook up in the Manua Tabes the amount shown in coumn 3 to find the Tota tax due to date. Take the previous amount in coumn 6 and the amount you now enter in coumn 6. Take the ower amount away from the higher amount to give the Tax deducted or refunded in the week or month. If the amount you now enter in coumn 6 is the higher amount, the difference is the tax to deduct from the empoyee. If the previous amount is the higher amount, the difference is the tax to refund and incude in the payment you make to the empoyee. Mark any refund entry R. Code BR cases - week 1/month 1 basis Coumn 3 Coumn 4a Coumn 5 Coumn 6 Coumn 7 Leave bank. Leave bank. Leave bank. Leave bank. Use the Cacuator Tabes, or ook up in the Manua Tabes the amount shown in coumn 2 to find the amount of tax to deduct. 7

10 Code NT cases - week 1/month 1 basis Coumn 3 Leave bank. Coumn 4a Leave bank. Coumn 5 Coumn 6 Coumn 7 Leave bank. Leave bank. Leave bank. Code NT cases - cumuative basis Coumn 3 Coumn 4a Add the amount you recorded in coumn 2 to the ast previous amount in coumn 3 to give the Tota pay to date. Leave bank. Coumn 5 Leave bank. Coumn 6 Enter Coumn 7 K code cases - cumuative basis Coumn 3 Coumn 4a Coumn 4b Coumn 5 Take the 0.00 you now enter in coumn 6 from any previous amount in coumn 6. The difference is the tax to refund and incude in the payment you make to the empoyee. Mark any refund entry R. Add the amount you recorded in coumn 2 to the ast previous amount in coumn 3 to give the Tota pay to date. Leave bank. Enter the Tota pay adjustment to date figure from the Pay Adjustment Tabes, Tabes A. This is the figure you enter for Tota additiona pay to date. Add the amount recorded in coumn 4b to the amount in coumn 3 to give the Tota taxabe pay to date. Coumn 6 Coumn 6a Coumn 6b Coumn 7 Coumn 8 Use the Cacuator Tabes, or ook up the Manua Tabes, to find out the Tota tax due to date. For the first payday after 5 Apri copy the amount in coumn 6. For other paydays: take the figure in coumn 6 and compare it with the amount in coumn 6 for the previous payday take the ower amount away from the higher amount, and if the amount in coumn 6 for the previous payday is the ower amount, add to the resut any entry in coumn 8 for the previous payday. Enter the figure obtained as the Tax due at end of current period if the amount in coumn 6 for the previous payday is the higher amount, take away from the resut any entry in coumn 8 for the previous payday. Enter the figure obtained in coumn 6a. The amount you have just entered in coumn 6a is the tax to refund for this week/month and shoud be marked R. The exception to this is where the amount in coumn 8 for the previous payday is greater than the difference between the higher and ower amounts in coumn 6, when a tax deduction is then appropriate. Enter 50% of the Pay in the week or month. This is the Reguatory imit. The amount of Tax deducted you enter in this coumn is the ower of the figures you have entered in coumns 6a and 6b, uness the figure you have just entered in coumn 6a shows that a tax refund is due. If a refund is due, copy the amount from coumn 6a and mark it R. If the amounts in coumns 6b and 7 are the same, take away the amount in coumn 6b from the amount in coumn 6a to give the Tax not deducted owing to the Reguatory imit. Leave bank if they are not the same. 8

11 K code cases - week 1/month 1 basis Coumn 3 Coumn 4a Coumn 4b Coumn 5 Leave bank. Leave bank. Enter the Tota pay adjustment to date figure from week 1 or month 1 of the Pay Adjustment Tabes, Tabes A. This is the figure you enter for Tota additiona pay to date. Add the amount recorded in coumn 4b to the amount in coumn 2 to give the Tota taxabe pay to date. Coumn 6 Coumn 6a Coumn 6b Leave bank. Use the Cacuator Tabes or ook up in the Manua Tabes the amount in coumn 5 to find the Tax due at end of current period. Enter 50% of the Pay in the week or month. This is the Reguatory imit. Coumn 7 Copy the ower of the figures you have just entered in coumns 6a or 6b. Coumn 8 Leave bank. Unusua circumstances The CWG2(2013) Empoyer Further Guide to PAYE and NICs, under pay intervas, gives information about what you shoud do if: there is more than one payday in any tax week or month reguar paydays are at other than weeky or monthy intervas an empoyee changes from being weeky to monthy paid or monthy to weeky paid you change your empoyee s payday but keep the same pay interva you make payments in addition to norma pay on a day that is not the reguar payday a payday fas on a non-banking day (Saturday, Sunday or Empoyer s contribution An empoyer s contribution is payabe if the empoyee: is aged 16 or over, and earns more than the Secondary Threshod (ST). An empoyer s contribution is payabe on a earnings above the ST, even if the empoyee is over State Pension age or otherwise excepted from paying their empoyee s contribution. How to work out NICs To work out NICs you must first decide: the correct earnings period the amount of gross pay due to the empoyee within that earnings period, and a bank hoiday). the contribution Tabe etter. Phone the Empoyer Hepine for information about what you shoud do in any other unusua circumstances. Part 3 Working out and recording Nationa Insurance contributions (NICs) on form P11 How Cass 1 NICs are made up Cass 1 NICs are made up of two eements: empoyee s contribution (aso known as the primary contribution) which you are iabe to pay in the first instance but which can be deducted from your empoyee s pay, and empoyer s contribution (aso known as the secondary contribution) which you are iabe to pay. Earnings period You must work out NICs on a payment-by-payment basis. NICs are worked out on the empoyee s gross pay above the ST and PT using the appropriate percentage rates, and are based on the period of time for which the earnings are paid. If you pay an empoyee weeky, the earnings period is one week. If you pay an empoyee monthy, the earnings period is one month. For more information about earnings periods, see the CWG2(2013) Empoyer Further Guide to PAYE and NICs, under pay intervas. Gross pay Empoyee s contribution Gross pay for NICs purposes is known as earnings. Gross pay is the amount due to the empoyee before any deductions. An empoyee s contribution is payabe if the empoyee: Gross pay incudes such things as: is aged 16 or over and under State Pension age, and saaries earns more than the Primary Threshod (PT). wages An empoyee s contribution is payabe on a earnings above overtime the PT. bonus payments, commission and so on. For exceptions to this rue see pages 28 to 30 in this hepbook. Currenty State Pension age for men is 65. For women born before 6 Apri 1950 State Pension age is 60. State Pension age for women who were born on or after 6 Apri 1950 wi graduay increase from 60 to 65 between 2010 and For more information see page 30 of this hepbook or go to For more detais of what shoud be incuded as gross pay, see chapter 5 of the CWG2(2013) Empoyer Further Guide to PAYE and NICs. 9

12 Contribution category etter NICs are divided into casses and there are different rates for Cass 1 NICs, identified by category etters. It is important to know which rate or rates appy to each empoyee. Each category is aocated a contribution category etter. This etter corresponds with the etters shown in the Nationa Insurance contributions Tabes (NICs Tabes) and is referred to as a contribution Tabe etter. To identify which contribution Tabe etter to use, see the fowchart on page 31. Cacuating NICs There are two methods of cacuating NICs. You can use either the NICs Tabes or the exact percentage method. The same earnings imits and rates are used in both methods. You wi find these either in the E12(2013) PAYE and NICs rates and imits for or the NICs Tabes. Directors NICs There are specia rues for cacuating NICs for directors. If you need to cacuate NICs for directors foow the guidance in the CA44 Nationa Insurance for Company Directors. NICs Tabes You must use the correct NICs Tabes to work out the NICs due on your empoyee s earnings. Use the fowchart on page 31 to check that you are using the correct tabes. The NICs are worked out using whoe pounds ony. In the NICs Tabes earnings are based on steps of 1 (weeky) and 4 (monthy) between the Lower Earnings Limit (LEL) and Upper Earnings Limit (UEL). With the exception of the LEL, Secondary Threshod (ST), Primary Threshod (PT), Upper Accrua Point (UAP) and UEL, NICs are worked out on the midpoint of each step. For exampe, in the weeky tabe, NICs for earnings between 199 and are worked out on If you use the NICs Tabes to work out NICs, you and your empoyee may pay sighty more or ess than if you used the exact percentage method. Each set of NICs Tabes gives hep on how to use them. Fiing in the form P11 using the NICs Tabes If you use the NICs Tabes to work out the NICs payabe you can use the same tabe to hep you fi in the form P11. Copy the figures in coumns 1a to 1f of the tabe to the coumns 1a to 1f of the form P11 on the ine next to the tax week or month in which the empoyee is paid. To work out the empoyee s contribution Work out the empoyee s gross pay due and the earnings period. Empoyee s NICs are ony payabe when the empoyee s earnings exceed the weeky, monthy or equivaent PT, see the E12(2013) PAYE and NICs rates and imits for NICs are due on earnings between the PT and the UAP and then the UAP to the UEL at the appropriate main empoyee s percentage rate(s). If the empoyee s earnings exceed the UEL, NICs are aso due at the additiona empoyee s percentage rate(s) on a earnings above the UEL. Earnings are above the PT but do not exceed the UAP Deduct the weeky or monthy PT from the earnings and mutipy the resut by the appropriate main empoyee s percentage rate to work out the NICs due (round the cacuation to the nearest penny, disregarding or ess). Earnings are above the UAP but do not exceed the UEL Deduct the weeky or monthy PT from the weeky or monthy UAP and mutipy the resut by the appropriate main empoyee s percentage rate (round the cacuation to the nearest penny, disregarding or ess). Deduct the weeky or monthy UAP from the earnings and mutipy the resut by the appropriate main empoyee s percentage rate (round the cacuation to the nearest penny, disregarding or ess). Add both amounts together to work out the empoyee s NICs due. Earnings exceed the UEL Deduct the weeky or monthy PT from the weeky or monthy UAP, and mutipy this amount by the appropriate main empoyee s percentage rate (round the cacuation to the nearest penny, disregarding or ess). Deduct the weeky or monthy UAP from the weeky or monthy UEL and mutipy this amount by the appropriate main empoyee s percentage rate (round the cacuation to the nearest penny, disregarding or ess). Deduct the weeky or monthy UEL from the tota earnings and mutipy this amount by 2 per cent the additiona empoyee s percentage rate (round the cacuation to the nearest penny, disregarding or ess). Add a amounts together to work out the empoyee s NICs due. For detais of the empoyee s percentage rates, see the E12(2013) PAYE and NICs rates and imits for Exact percentage method If you decide to use this method the NICs must be worked out using the empoyee s gross pay pounds and pence. Each eement of the empoyee s and empoyer s contributions must be worked out separatey. 10

13 To work out the empoyer s contribution Use the same gross pay due and earnings period to work out the empoyer s contribution. The appropriate empoyer s percentage rate(s) is (are) used to work out the NICs due on a earnings above the ST, incuding those above the UEL. If the empoyee is a member of your contracted-out occupationa pension scheme, NICs are worked out using: the appropriate empoyer s contracted-out percentage rate on earnings above the ST, up to and incuding the PT and on earnings above the PT, up to and incuding the UAP (round the cacuations to the nearest penny, disregarding or ess) the empoyer s not contracted-out percentage rate on the earnings above the UAP, up to and incuding the UEL (round the cacuation to the nearest penny, disregarding or ess) the empoyer s not contracted-out percentage rate on the earnings above the UEL (round the cacuation to the nearest penny, disregarding or ess). A amounts are added together before recording the NICs due on form P11. Exampes of working out NICs using the exact percentage method The foowing three exampes each show how to work out NICs and fi in form P11 when you use the exact percentage method and the empoyee is not contracted-out. You wi find detais of the rates and imits in the E12(2013) PAYE and NICs rates and imits for Exampe 1 An empoyee is weeky paid. NICs are due under contribution Tabe etter A. The empoyee is paid on 19 Juy minus 148 (ST) = minus 149 (PT) = (PT) minus 148 (ST) = 1 Empoyee s contribution x 12% = rounded to This is the figure to enter in coumn 1f on form P11. Empoyer s contribution 1 x 13.8% = rounded to x 13.8% = rounded to The tota of empoyee s and empoyer s contributions payabe is = This is the figure to enter in coumn 1e of the form P11. The earnings coumns 1a, 1b, 1c and 1d of the form P11 are fied in as foows: 1a LEL 109 1b PT minus LEL = 40 1c Empoyee s earnings minus PT = d 0.00 Exampe 2 An empoyee is monthy paid. NICs are payabe under contribution Tabe etter A. 3, is paid on 26 Juy Empoyee s contribution The empoyee is iabe for NICs on a earnings above the PT, incuding any earnings above the UEL. 3,337 (UAP) minus 646 (PT) = 2,691 2,691 x 12% = ,454 (UEL) minus 3,337 (UAP) = x 12% = , minus 3,454 (UEL) = x 2% = rounded to 2.86 Empoyee s NICs = = This is the figure to enter in coumn 1f on form P11. Empoyer s contribution 646 (PT) minus 641 (ST) = 5 5 x 13.8% = ,337 (UAP) minus 646 (PT) = 2,691 2,691 x 13.8% = rounded to ,454 (UEL) minus 3,337 (UAP) = x 13.8% = rounded to , minus 3,454 (UEL) = x 13.8% = rounded to Empoyer s NICs = = The tota of empoyee s and empoyer s contributions payabe is = This is the figure to enter in coumn 1e on form P11. The earnings coumns 1a, 1b, 1c and 1d of the form P11 are fied in as foows: 1a LEL 473 1b PT minus LEL = 173 1c UAP minus PT 3, = 2,691 1d UEL minus UAP 3,454 3,337 =

14 Exampe 3 The basic principes for cacuating the LEL, ST, PT, UAP and UEL for empoyees paid in exact mutipes of a week are the same, and are set out in the exampe beow. For instance, for an empoyee paid every two weeks, the LEL, ST, PT, UAP and UEL woud be as foows: LEL = 109 x 2 = 218 ST = 7, = 148 x 2 = 296 (rounded up to the next whoe pound) PT = 7, = x 2 = 299 (rounded up to the next whoe pound) UAP = 770 x 2 = 1,540 UEL = 41, = x 2 = 1,595 (rounded up to the next whoe pound) An empoyee is paid every four weeks. NICs are due under contribution Tabe etter A. The empoyee is paid on 19 Juy The first step is to work out the ST, PT and the UEL for a four-weeky earnings period. To do this, divide the annua figures by 52, then mutipy the answer by four. Finay, round up the answer to the next whoe pound. Secondary Threshod 7, = 148 x 4 = 592 Primary Threshod 7, = x 4 = 597 UEL 41, = x 4 = 3,189 LEL and UAP You then work out the LEL and the UAP for the four-weeky earnings period by mutipying the weeky imits by the number of weeks in the earnings period, in this exampe four. LEL = 109 x 4 = 436 UAP = 770 x 4 = 3,080 As the earnings fa between the PT and UAP, NICs are worked out as foows: Empoyee s contributions minus 597 = x 12% = rounded to is the figure to be entered in coumn 1f on form P11. Empoyer s contributions 597 (PT) minus 592 (ST) = 5 x 13.8% = minus 597 (PT) = x 13.8% = rounded to The tota of empoyee s and empoyer s contributions payabe is = This is the figure to enter in coumn 1e on form P11. The earnings coumns 1a, 1b, 1c and 1d of the form P11 are fied in as foows: 1a LEL 436 1b PT minus LEL = 161 1c Empoyee s earnings minus PT minus 597 = d 0.00 Contracted-out occupationa pension schemes If the empoyee is a member of your contracted-out occupationa pension scheme you wi aso have to work out empoyee s and empoyer s NIC rebates. If you use the appropriate NICs Tabes for contracted-out pension schemes NIC rebates are worked out for you and are taken into account in arriving at the amount of NICs shown as due. Empoyee s NIC rebate The empoyee s NIC rebate is cacuated on earnings between the LEL and the PT. The empoyee is entited to that portion of their own rebate that can be offset against their NICs. The empoyer is entited to any baance of the empoyee s NIC rebate that cannot be offset against the empoyee s NICs. Empoyer s NIC rebate The empoyer s NIC rebate is cacuated on earnings between the LEL and the ST. The empoyer is entited to their own rebate pus any baance of empoyee s NIC rebate not offset. Exampe Empoyee earns 149 per week (contribution Tabe etter D) Empoyee s NICs = Ni (earnings up to and incuding PT) Empoyer s NICs = 1 x 10.4% = 0.10 Empoyee s NICs rebate = = 39 x 1.4% = 0.55, Pus 1 (earnings between ST and PT) x 1.4% = 0.01 Tota rebate = 0.56 Empoyer s NICs rebate = = 39 x 3.4% = 1.33 The empoyee is not entited to any of their NIC rebate because their NIC iabiity is ni is the figure to be entered in coumn 1f on form P11. The empoyer is entited to the fu empoyee rebate of 0.56, pus their own NIC rebate of 1.33 = empoyer rebate offset against 0.10 empoyer NICs = minus 1.79 empoyer NICs. R1.79 is the figure to be entered in coumn 1e on form P11. (Negative figures shoud be shown by an R immediatey before the entry in coumn 1e of the form P11.) You can find more information in the: CA39 Nationa Insurance Contributions Tabes CWG2(2013) Empoyer Further Guide to PAYE and NICs under occupationa pension schemes. 12

15 Fiing in a form P11 NICs If, during any earnings period in the year, the empoyee earns beow the LEL, do not enter these earnings in coumns 1a to 1d of the P11. When an empoyee s earnings are at or above the LEL at any time during the year, you must fi in the Nationa Insurance (NI) section of the form P11 or equivaent record, even if the empoyee does not pay any NICs. You must report this information at the end of the tax year. This is to protect the empoyee s entitement to benefits, which is inked to earnings at or above the LEL. Enter a the detais of earnings at or above the LEL, and NICs in the appropriate coumns 1a to 1f that corresponds to the week or month number in which you make a payment to an empoyee. 1a Earnings at the LEL (where earnings are equa to or exceed the LEL) 1b Earnings above the LEL, up to and incuding the PT 1c Earnings above the PT, up to and incuding the UAP 1d Earnings above the UAP, up to and incuding the UEL Where an empoyee s earnings exceed the UEL, ony record in coumn 1d of the P11 the earnings from the UAP up to and incuding the UEL. You shoud not incude the amount of earnings in excess of the UEL, even though the NICs payabe on these earnings wi be incuded in the tota NICs figure recorded in coumn 1e. Month number Week number 1 Nationa Insurance contributions Earnings at the LEL (where earnings are equa to or exceed the LEL) 1a Earnings detais Earnings above the LEL, up to and incuding the PT 1b p Earnings above the PT, up to and incuding the UAP 1c p Note: LEL = Lower Earnings Limit; PT = Primary Threshod UAP = Upper Accrua Point; UEL = Upper Earnings Limit Contribution detais Earnings above the UAP, up to and incuding the UEL Tota of empoyee s and empoyer s contributions - mark minus amounts 'R' 1d p 1e p Empoyee s contributions due on a earnings above the PT 1f p Statutory payments Statutory Sick Pay (SSP) paid to empoyee in the week or month incuded in coumn 2 1g p Statutory Maternity Pay (SMP) paid to empoyee in the week or month incuded in coumn 2 1h p Ordinary Statutory Paternity Pay (OSPP) paid to empoyee in the week or month incuded in coumn 2 1i p Additiona Statutory Paternity Pay (ASPP) paid to empoyee in the week or month incuded in coumn 2 1j p Statutory Adoption Pay (SAP) paid to empoyee in the week or month incuded in coumn 2 1k p Student Loan deductio (SLD) (whoe pounds on 1 Earnings detais Coumn 1a Earnings at the Lower Earnings Limit (LEL) If the empoyee earns at or above the LEL, enter the LEL figure. If the earnings do not exceed the LEL there wi be no NICs payabe. Enter 0.00 in coumns 1b to 1f. Coumn 1b Earnings above the LEL, up to and incuding the Primary Threshod (PT) Enter any earnings above the LEL, up to and incuding the PT. If the earnings are constanty above the PT, the figure entered here wi be the same each earnings period. If NICs Tabes are used, the amount entered wi be in whoe pounds ony. If the exact percentage method is used, the amount entered wi be in pounds and pence, uness earnings reach or exceed the PT in which case the entry wi be in whoe pounds ony. If the earnings do not exceed the ST and PT and there are no NICs rebates due there wi be no NICs payabe and coumns 1c to 1f wi be zero fied. Coumn 1c Earnings above the PT, up to and incuding the Upper Accrua Point (UAP) Enter any earnings above the PT, up to and incuding the UAP. If the earnings are constanty above the UAP, the figure entered here wi be the same in each earnings period. If NICs Tabes are used, the amount entered wi be in whoe pounds ony. If the exact percentage method is used, the amount entered wi be in pounds and pence, uness earnings reach or exceed the UAP in which case the entry wi be in whoe pounds ony. Coumn 1d Earnings above the UAP, up to and incuding the Upper Earnings Limit (UEL) Enter any earnings above the UAP, up to and incuding the UEL. If the earnings are constanty above the UEL, the figure entered here wi be the same in each earnings period. Do not incude those earnings above the UEL. If NICs Tabes are used, the amount entered wi be in whoe pounds ony. If the exact percentage method is used, the amount entered wi be in pounds and pence, uness earnings reach or exceed the UEL in which case the entry wi be in whoe pounds ony. 13

16 Contribution detais Coumn 1e Tota of empoyee s and empoyer s contributions payabe Enter the combined tota of both the empoyee s and empoyer s NICs, not just the empoyer s NICs. Incude any NICs payabe on earnings above the UEL, where appropriate. Where NICs are due under contribution Tabe etter D or L the amount to be entered is the combined tota after deduction of any empoyee s and empoyer s NIC rebates. Coumn 1f Empoyee s contribution payabe on earnings in 1c and 1d This coumn shoud show ony the empoyee s NICs payabe incuded in coumn 1e. Incude any empoyee s NICs payabe on earnings above the UEL, where appropriate. If there are no empoyee s NICs payabe, enter If contribution Tabe etter D or L is used, the amount entered shoud be the empoyee s NICs payabe after deducting the empoyee s NIC rebate. If this amount is zero enter Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP), Ordinary Statutory Paternity Pay (OSPP), Additiona Statutory Paternity Pay (ASPP), Statutory Adoption Pay (SAP) and Student Loan deductions Coumn 1g Statutory Sick Pay Recording SSP is optiona if you are not recovering any SSP in the same tax month. You need ony enter SSP paid in those tax months where a recovery is made. For more information see the E14(2013) Empoyer Hepbook for Statutory Sick Pay. Coumn 1h Statutory Maternity Pay Enter the gross amount of SMP paid before deducting NICs, tax or any other deductions due. For more information see the E15(2013) Empoyer Hepbook for Statutory Maternity Pay. Coumn 1i Ordinary Statutory Paternity Pay Enter the gross amount of OSPP paid before deducting tax, NICs or any other deductions due. For more information on whether your empoyee is entited to OSPP, in the case of a birth or adoption, see the E19(2013) Empoyer Hepbook for Ordinary and Additiona Statutory Paternity Pay. Coumn 1j Additiona Statutory Paternity Pay Enter the gross amount of ASPP paid before deducting tax, NICs or any other deductions due. For more information on whether your empoyee is entited to ASPP, in the case of a birth or adoption, see the E19(2013) Empoyer Hepbook for Ordinary and Additiona Statutory Paternity Pay. Coumn 1k Statutory Adoption Pay Enter the gross amount of SAP paid before deducting tax, NICs or any other deductions due. For more information see the E16(2013) Empoyer Hepbook for Statutory Adoption Pay. Coumn 1 Student Loan deductions You shoud ony use this coumn to make Student Loan deductions from an empoyee s earnings if you have been notified in one of the foowing ways: we have sent you an SL1 Student Loan Start Notice your new empoyee gives you a P45 which has a Y in box 5 you have submitted a form P46 with a tick in box D. The figure to be entered is the amount of Student Loan deductions worked out using the SL3 Student Loan Deduction Tabes. Amounts must be rounded down to whoe pounds. To find out what you need to do when you receive a Start Notice form SL1, see page