Paying someone for the first time

Transcription

1 VGW&Co note: Year end etc. fiing has been superceded by RTI Rea Time Information procedures. Basic principes in this pubication sti appy. Paying someone for the first time Use with Basic PAYE Toos from 6 Apri 2012 Updated on 11 Juy 2012 Empoyer Hepbook P49(2012)

2 Hep and guidance Hep and guidance is avaiabe from the foowing sources. The internet For hep with payro go to For wider interactive business hep go to Onine services For information and hep using our Onine Services go to For more hep contact the Onine Services Hepdesk by: emai phone , or textphone Basic PAYE Toos The Basic PAYE Toos contains a number of cacuators and most of the forms that you wi need to hep you run your payro throughout the year incuding: a P11 Cacuator that wi work out and record your empoyee s tax, NICs and Student Loan deductions every payday, with a inked P32 Empoyer Payment Record that works out how much you need to pay us a range of other cacuators to work out Student Loan deductions and statutory payments and a earning zone to hep you understand these and other payro topics an empoyer database to record your empoyees detais interactive forms such as the P11D Working Sheets. If you use the P11 Cacuator in the Basic PAYE Toos you can fie onine your: starter and eaver information P45 Part 1, P45 Part 3, P46 information and P46(Expat) information Empoyer Annua Return (if you have up to and incuding nine empoyees) on the P11 Cacuator at 5 Apri. To downoad the Basic PAYE Toos, go to 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 Exceptionay, if you don t have access to the internet, some of our hepbooks and forms are avaiabe from the Empoyer Orderine on Yr aith Gymraeg I awrwytho ffurenni a yfrynnau cymorth Cymraeg, ewch i 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. In person We offer free workshops covering some payro topics. These workshops are avaiabe at ocations throughout the UK. For more information: go to or phone our Business Education & Support Team on 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 HM Revenue & Customs (HMRC) If you have a query about your PAYE scheme: phone the Empoyer Hepine on , or write to: HM Revenue & Customs Customer Operations Empoyer Office BP4009 Chiingham House Benton Park View NEWCASTLE NE98 1ZZ Pease te us your empoyer reference when you contact us. You wi find it on correspondence from HMRC. Rea Time Information (RTI) From Apri 2013, HMRC is introducing Rea Time Information (RTI). Under RTI, empoyers and pension providers wi send HMRC information when they pay their empoyees, instead of yeary. For more information go to Your rights and obigations Your Charter expains what you can expect from us and what we expect from you. For more information go to 2 New Empoyer Hepine

3 Contents Getting started Introduction What you have to do Information needed from your empoyee P11 Taking on an empoyee with a form P P11 Taking on an empoyee without a form P Do it Onine Setting up your payro Using the Basic PAYE Toos Using the Basic PAYE Toos to run your payro Manua wages records Using and preparing a paper form P11 Deductions Working Sheet Where to start competing the form P11 Deductions Working Sheet Nationa Insurance contributions and how to cacuate them Competing the P11 Nationa Insurance contributions Using a tax code Code numbers with L, P, T or Y not foowed by week 1, month 1 or X Code numbers with L, P, T or Y foowed by week 1, month 1 or X Code BR not foowed by week 1, month 1 or X Code BR foowed by week 1, month 1 or X What next? What next? Paying your empoyees Paying HM Revenue & Customs Other things you need to know Terms and abbreviations used in this hepbook

4 Introduction Getting started Introduction This hepbook wi hep you to get started, and in most circumstances gives you a the information that you wi need to pay your empoyee(s). As an empoyer, you are responsibe for cacuating and deducting Pay As You Earn (PAYE) tax and Nationa Insurance contributions (NICs) from your empoyees pay. To hep you to make your cacuations and keep your records, downoad the Basic PAYE Toos from There are cacuators within the Basic PAYE Toos that wi hep you with your payro, incuding the P11 Cacuator which wi work out and record your empoyees tax and Nationa Insurance contributions. This hepbook gives you step-by-step guidance on how to: set up your payro using either the Basic PAYE Toos or a manua P11 Deductions Working Sheet cacuate PAYE tax and NICs issue a paysip to your empoyee make payments to HM Revenue & Customs (HMRC), and do business with us onine, incuding making payment by Direct Debit Onine. How to use this guidance Quick guide to paying someone for the first time To make it easier for you we have coour-coded each section of this hepbook. When you have decided how you are going to maintain your payro, you must read the bue 'Getting started' section then: the pink 'Using the Basic PAYE Toos' section if you are using the Basic PAYE Toos, foowed by the purpe 'What next?' section, or the green 'Manua wages records' section if you are using a manua wages record, foowed by the purpe 'What next?' section. We recommend that you work your way through this hepbook in the order that it has been written, returning to the appropriate page when you have carried out each task. You wi find a ist of terms and abbreviations used throughout this hepbook on pages 85 to 87. The fowchart opposite may hep you to get your payro started quicky, before reading the contents of this hepbook in detai. It describes the first payro tasks you must perform when you pay your empoyee for the first time, however you wi need to compete other payro tasks throughout the year. 4 New Empoyer Hepine

5 Introduction Before you begin When you take on someone new, there are some important checks that you have to make before you pay them. You need to: decide whether they are an empoyee or sef-empoyed see page 10 check their identity and that they can egay work for you see page 11. Working out what tax code to use Getting started Has your empoyee given you a form P45? No No Phone the New Empoyer Hepine. They wi advise you what tax code to use see page 14. See page 14. Is the eaving date at box 4 of the P45 within the current tax year (from 6 Apri 2012 to 5 Apri 2013)? Yes Yes Use the tax code shown in box 6 of the P45 see page 15. Get P46 information from your empoyee see pages 16 and 17. Determine the tax code from the provided P46 information see page 18. Setting up your payro You are now ready to set up your payro. If you: want to use the P11 Cacuator in the Basic PAYE Toos (which works out the tax and Nationa Insurance contributions for each empoyee for every pay period) downoad the toos onto your computer. If you are using a manua P11 Deductions Working Sheet you wi need to order this form from the Empoyer Orderine. Once received go to page 52. Paying your empoyee and HMRC Cacuate the PAYE tax and NICs on your empoyee s gross pay. You must pay most of your workers at east the Nationa Minimum Wage rates, for further information see page 11. Check your empoyee s form P45 or P46 information. If box 5 of the form P45 (see pages 14 and 15) or the P46 information (see pages 16 and 17) indicates that you need to make Student Loan deductions from your empoyee s pay, the P11 Cacuator in the Basic PAYE Toos wi cacuate the deductions for you see page 34. If you are operating a manua payro phone the New Empoyer Hepine. Finay, you wi need to: issue a paysip to your empoyee see page 76, and make payments to HMRC see page

6 Introduction Getting started First things first operating your payro The first thing that you need to do is decide how you are going to keep and maintain your payro records. There are different choices avaiabe to you. You can: ask a bookkeeper, agent or a payro bureau to operate your payro for you use a payro software package. These can be purchased off-the-shef from most software retaiers or from the Internet. operate the payro yoursef using either: the P11 Cacuator in the Basic PAYE Toos. If you are not using payro software this is the easiest and quickest way to maintain your payro a manua wages record P11 Deductions Working Sheet and the PAYE tax and NICs cacuators go to a manua wages record P11 Deductions Working Sheet and the manua PAYE tax and NICs tabes. If you wish to use a manua wages record it is much easier and quicker to use the PAYE tax and NICs cacuators on our website to work out the PAYE tax and NICs due. * * Whie you have the option of maintaining a manua payro, your Empoyer Annua Return (P35 and P14s) and empoyee starter and eaver forms P45 and P46 must be fied onine. If you have not aready registered and enroed for our PAYE Onine service, you must do this now so that you can fie your forms and returns onine. Pease do not send us any forms or returns on paper as you may be charged a penaty see page 20 for further detais. 6 New Empoyer Hepine

7 Introduction Whatever option you choose it is important to remember that you, as the empoyer, are sti responsibe for your payro, even if you don't prepare the records yoursef. We offer a range of hep and support to hep you with your payro, see 'Hep and guidance' on page 2. Our Business Education and Support Team offer free workshops covering a payro topics. These workshops are avaiabe at ocations nationwide. For more information go to or phone the business, education and event booking service on Getting started How do I get started? If you are: using a bookkeeper, agent or a payro bureau to operate your payro you must pass detais of your empoyees on to them using the Basic PAYE Toos to operate your payro downoad the toos to your computer from Finish reading the bue section of this hepbook then go to page 23. operating a manua payro you wi need to use a P11 Deductions Working Sheet which you can order from the Empoyer Orderine. If you are not using the cacuators on our website you wi aso need to order the manua tabes isted on page 8 Finish reading the bue section of this hepbook then go to page 52. Note: It is much easier and quicker to use the P11 Cacuator on the Basic PAYE Toos

8 CA38 with your cacuations? these manua Tax Tabes. Introduction Getting started Nationa Insurance contributions Tabes A and J Use from 6 Apri 2012 to 5 Apri 2013 incusive Not contracted-out tabes Nationa Insurance contributions Tabes There are many different types of NICs tabes. For most men and women aged 16 or over and under State Pension age you wi use the CA38 Nationa Insurance contributions Tabes A and J pictured aside. However you wi need to contact the New Empoyer Hepine to ask which tabes you need to order if: your empoyee is a married woman or widow who tes you that they are entited to pay reduced rate NICs your empoyee is State Pension age or over you operate a company pension scheme. The NICs tabes work out how much NICs you and your empoyee have to pay. Tabes A Pay Adjustment Tabes Use these tabes to work out how much of your empoyee's pay is tax-free. Taxabe Pay Tabes Cacuator Method Taxabe Pay Tabes Cacuator Method Cacuator Tabes (Apri 2012) Use these tabes to work out how much tax is due. You need a cacuator to use these tabes. Before you start to use these tabes to compete your payro manuay have you considered keeping your records eectronicay to hep you You can cacuate your payro automaticay by using either: payro software, or the P11 Cacuator from HMRC Basic PAYE Toos to If you are competing your payro manuay you can cacuate the amount of tax due on your empoyee s earnings by using either: the PAYE Tax Cacuator go to or Keep using Tabes A 1993 issue Pay Adjustment Tabes Use pages 2 and 3 for monthy paid empoyees Use pages 4, 5 and 6 for weeky paid empoyees Empoyer hepbooks The fowchart on page 5 describes the first payro tasks you must perform when you pay your empoyee for the first time, however, you wi need to compete other payro tasks throughout the year. 8 New Empoyer Hepine

9 Nationa Minimum Wage Coection of Student Loans Introduction Day-to-day payro Empoyer Hepbook E13(2012) 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 (may be referred to as PENNOT in some 3rd party software products) 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 2012 The foowing hepbooks wi hep you with these tasks. They are avaiabe from If, exceptionay you cannot access them onine contact the Empoyer Orderine. E13 Day-to-day payro This hepbook is for the very sma number of empoyers who are exempt from the requirement (see page 19 for a summary of exempt empoyers) to fie their starter and eaver information and simiar pension information onine. It gives guidance on day-to-day payro tasks, for exampe: what action to take when an empoyee eaves what to do when you are notified of a change to an empoyee s tax code how to identify the correct rate of NICs if there is a change in an empoyee s circumstances. Getting started Empoyer Hepbook E12(2012) PAYE and NICs rates and imits for Incudes: PAYE threshods and rates Emergency tax code Approved mieage aowance payments Cass 1A Nationa Insurance contributions (NICs) on benefits in kind Cass 1B Nationa Insurance contributions (NICs) NICs earnings imits, threshods and rates Statutory Sick Pay (SSP) Statutory Maternity Pay (SMP) Ordinary Statutory Paternity Pay (OSPP) Additiona Statutory Paternity Pay (ASPP) Statutory Adoption Pay (SAP) Funding of SMP, OSPP, ASPP and SAP E12 PAYE and NICs rates and imits for This hepbook gives detais of: PAYE threshods and rates mieage payments Use from 6 Apri 2012 Cass 1 Nationa Insurance rates and earnings imits Cass 1A Nationa Insurance rate Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP), Ordinary Statutory Paternity Pay (OSPP), Additiona Statutory Paternity Pay (ASPP) and Statutory Adoption Pay (SAP) rates Nationa Minimum Wage rates coection of Student Loans. Starting the tax year from 6 Apri 2012 Empoyer Hepbook E11(2012) Incudes: Records you need to keep Form P11 Preparing form P11 New tax codes from 6 Apri 2012 Cacuating tax, Nationa Insurance contributions (NICs), and Student Loan deductions How ong to keep records Payro Software Use from 6 Apri 2012 E11 Starting the tax year from 6 Apri 2012 This hepbook tes you what you need to do to prepare for the start of , for exampe: what records you need to keep from how to change your empoyee s tax code from the start of how ong to keep the records

10 What you have to do Getting started Once you have set up your payro you may have to dea with Student Loan deductions, SSP, SMP, OSPP, ASPP and SAP, stakehoder pensions and Payro Giving. If you come across any of these, phone the New Empoyer Hepine. Once you take on an empoyee, you are responsibe for cacuating and deducting PAYE tax and NICs from their pay. Before you do this, you have to recognise who counts as an empoyee. Who counts as an empoyee An empoyee is anyone you empoy under a contract of service, and incudes fu-time, part-time and casua workers. If someone working for you says they are sef-empoyed you must check that this is actuay the case. It is not a matter of choice. This is because the tax and Nationa Insurance rues for sef-empoyed peope are different to the rues for empoyees. It is your responsibiity as an empoyer to ensure that you have the correct empoyment status for everyone working for you. For more information on how to determine a worker s empoyment status go to empoyees/start-eave/status.htm or phone the New Empoyer Hepine for advice. Directors of imited companies are aso empoyees of the company so you must deduct tax and NICs from their pay. There are specia rues for directors phone the New Empoyer Hepine for advice. What counts as pay The main things that count as pay are: wages saary overtime payments bonuses. But there are others. Pease phone the New Empoyer Hepine for advice if you: pay expenses to directors and/or your empoyee(s), or suppy extras, such as a car or private medica insurance. 10 New Empoyer Hepine

11 What you have to do Nationa minimum wage Identity checks Stakehoder pensions Most peope working in the UK for an empoyer are entited to be paid a minimum amount defined by aw. This is caed the nationa minimum wage. To find out more about the nationa minimum wage, incuding how much this is: go to or phone the Pay and Work Rights Hepine on As an empoyer you have a responsibiity to prevent iega working in the UK. The UK Border Agency recommends that empoyers conduct document checks for a new empoyees to make sure they are aowed to work before empoying them. If an empoyee has a time imit on their stay you shoud carry out repeat checks at east once every 12 months. If you don t do these checks you may need to pay a fine, known as a civi penaty of up to 10,000 for each iega worker you empoy. For more information: go to the 'Ensuring your workers are eigibe to work in the UK' pages of the Business Link website, at and seect the interactive too to check if your workers are eigibe to work in the UK, or go to the 'Prevent iega working' pages of the UK Border Agency website at or phone the UK Border Agency Sponsorship and Empoyers Hepine on Stakehoder pensions are a way for your empoyees to save for their retirement and increase their income in ater ife. If you empoy five or more peope you may have to make a stakehoder pension scheme avaiabe to those empoyees uness you are exempt. You are exempt if you offer your empoyees access to an occupationa pension scheme or contribute at east 3 per cent of their pay into a persona pension scheme. However, empoyees do not have to join the scheme if they don t want to, and empoyers do not have to contribute to the pension (athough they can if they wish). For further information go to Getting started

12 Information needed from your empoyee Getting started Your empoyee's tax code and Nationa Insurance number You wi need the foowing information from your empoyee. Tax code You wi usuay get this from item 6 of their form P45. If your empoyee does not give you a form P45, you and your empoyee must compete a form P46 or you must obtain the information required by the form P46 from your empoyee see the exampe on pages 16 and 17. You wi be abe to determine your empoyee's tax code from the P46 information suppied by your empoyee. If your new empoyee gives you a form P45, pease turn to pages 14 and 15. If your new empoyee does not have a form P45, pease turn to pages 16 and 17. Nationa Insurance number You wi normay get this from item 2 of their form P45 see the exampe on pages 14 and 15. If your empoyee does not give you a form P45, you may need to send us P46 information see pages 16 and 17. If you send us P46 information we wi automaticay trace the Nationa Insurance number and et you know what it is. If the P45 does not show the Nationa Insurance number, ask your empoyee if they can find the number on any other documentation they have, for exampe, written confirmation of their Nationa Insurance number from HMRC, paysips, or a form P60 End of Year Certificate from their previous empoyer. If your empoyee has never had a Nationa Insurance number they must contact their Jobcentre Pus office on and arrange to get one. If you have been unabe to obtain your empoyee's Nationa Insurance number you wi need to compete a form CA6855 Empoyee s Nationa Insurance number trace to enabe us to trace the number for you. 12 New Empoyer Hepine

13 Your empoyee's date of birth and gender Date of birth and gender You shoud aways enter your empoyee's correct date of birth and gender on the form P11 Deductions Working Sheet (or equivaent record) do not enter a defaut date of birth or make up a date of birth see pages 21, 52 and 53 for further information on competing the form P11 Deductions Working Sheet. Getting started

14 P11 Taking on an empoyee with a form P45 Getting started A new empoyees who come to you from another job, or from a period on state benefits, shoud bring with them a competed form P45. The P45 provides detais from your new empoyee's previous empoyment. Your empoyee must keep Part 1A of the P45 and give you Part 2 and Part 3. When you are given a form P45 the first thing you must do is check that the information on the P45 is correct because detais provided from a previous empoyer coud be wrong. It is aways best to check the persona information you need from officia sources ike a birth certificate, passport or officia documents from HMRC or the Department for Work and Pensions (DWP). This diagram expains the form and gives detais of the checks that you must make. The instructions at the bottom of page 15 te you what to do with Parts 2 and 3 of the form P45. Nationa Insurance number Aways enter the correct Nationa Insurance number. Do not make up a number, use a defaut or use one that beongs to someone ese. Name Make sure you give the fu first name(s) and surname and that you have spet the names correcty Empoyer PAYE reference Office number / Reference number Empoyee's Nationa Insurance number Q Q A Tite - enter MR, MRS, MISS, MS or other tite Mr Surname or famiy name Smith First or given name(s) John Item 4 See which tax year the P45 is for. To check the year of the P45 ook at the eaving date at item 4. If the eaving date is in the current tax year, in the period 6 Apri 2012 to 5 Apri 2013, use the tax code on the P45. If the eaving date is in a previous tax year, phone the New Empoyer Hepine for advice. Check tax 4 Leaving date DD MM YYYY To the empoyee This form is important to you. Take good care of it and keep it safe. Copies are not avaiabe. Pease keep Parts 2 and 3 of the form together and do not ater them in any way. Going to a new job Give Parts 2 and 3 of this form to your new empoyer, or you wi have tax deducted using the emergency code and may pay too much tax. If you do not want your new empoyer to know the detais on this form, send it to your HM Revenue & Customs (HMRC) office immediatey with a etter saying so and giving the name and address of your new empoyer. HMRC can If the P45 is for the current tax year and there is an entry at item 7, 'Tota tax to date', you must check this figure is correct. There is a 'P45 checker' in the Cacuator Section of the Basic PAYE Toos which wi check this figure for you. Otherwise, ca the New Empoyer Hepine and ask them to check the 'Tota tax to date' figure for you. 14 New Empoyer Hepine

15 P11 Taking on an empoyee with a form P45 P45 Part 2 Detais of empoyee eaving work Copy for new empoyer Caiming Jobseeker's Aowance or Empoyment and Support Aowance (ESA) Take this form to your Jobcentre Pus office. They wi pay you any tax refund you may be entited to when your caim ends, or at 5 Apri if this is earier. Not working and not caiming Jobseeker's Aowance or Empoyment and Support Aowance (ESA) If you have paid tax and wish to caim a refund ask for form P50 Caiming Tax back when you have stopped w any HMRC office or Enquiry Centre. H 5 6 Items 6 and 7 Check that the entries on both pages of the P45 at items 6 and 7 are the same. If they are not, phone the New Empoyer Hepine. Student Loan deductions Y Student Loan deductions to continue Tax Code at eaving date If week 1 or month 1 appies, enter 'X' in the box beow. Week 1/Month 1 7 Last entries on P11 Deductions Working Sheet. Compete ony if Tax Code is cumuative. If there is an X at box 6, there wi be no entries here. Week number L Tota pay to date Tota tax to date 0 7 Month number Student Loan deductions to continue If there is a 'Y', an 'X' or a tick shown at item 5 you wi need to work out any Student Loan deductions. If you are creating a P11 Deductions Working Sheet using the P11 Cacuator in the Basic PAYE Toos simpy indicate that the empoyee is a Student Loan borrower in the Empoyer Database and the P11 Cacuator wi work out any deductions for you, see page 34. If you are using a manua P11 Deductions Working Sheet you can use the Student Loan Cacuator in the Basic PAYE Toos, or the SL3 Student Loan deduction tabes to work out the deduction for you but you wi need to enter the deduction in coumn 1 of the P11 Deductions Working Sheet or equivaent record. If you are not using the Basic PAYE Toos to maintain your payro, phone the New Empoyer Hepine for advice. Tax code You wi use either the tax code shown on the P45, or the tax code given to you by the New Empoyer Hepine (see item 4 on page 14) when you set up your payro record form P11 Deductions Working Sheet. Codes D, K or NT If the code number you are using starts with a D, K or is NT, ca the New Empoyer Hepine for advice. What to do with Parts 2 and 3 of form P45 Compete and fie a P45 part 3 onine. You must be registered for our PAYE Onine for Empoyers service, so that you can compete the P45 onine. See page 20 for more detais or go to You must keep Part 2 of the P45 for at east three years after the end of the tax year it is for. Getting started Once you have checked the form P45 and have your empoyee's tax code you are ready to set up your payro and work out how much to deduct from your empoyee's pay. Pease turn to page

16 Pag P11 Taking on an empoyee without a form P45 Getting started There are various reasons why your empoyee may not be abe to give you a form P45, for exampe: they have ost it this is their first job they are continuing in an existing job as we as working for you. P46 Section one To be competed by the empoyee Your empoyer wi need this information if you don t have a for to compete this form or provide the same information in anoth empoyer. Use capita etters when competing this form. Your detais Nationa Insurance number This is very important in getting your tax and benefits right Tite enter MR, MRS, MISS, MS or other tite Surname If your empoyee does not give you a P45 and they are: a student working for you soey during their hoidays, or First name(s) intending to work for you for one week or ess, with no expectation of coming back in the current tax year. Gender. Enter 'X' in the appropriate box Mae Femae Your present circumstances Read a the foowing statements carefuy and enter 'X' in the one box that appies to you. Phone the New Empoyer Hepine for further advice. In a other circumstances if your new empoyee doesn t have a P45, you and your empoyee must compete a form P46 or your empoyee must give you the equivaent information. Fiing in a P46 The P46 is divided into two sections. A This is my first job since ast 6 Apri and I have not been receiving taxabe Jobseeker's Aowance, Empoyment and Support Aowance or taxabe Incapacity Benefit or a state or A occupationa pension. OR B This is now my ony job, but since ast 6 Apri I have had another job, or have received taxabe Jobseeker's Aowance, Empoyment and Support Aowance or taxabe Incapacity Benefit. I do not receive B a state or occupationa pension. OR C I have another job or receive a state or C occupationa pension. P46 Pa Section one is for empoyee information. Section two is for empoyer information but ony needs to be competed if you are exempt from the requirement to fie onine and can submit the P46 on paper (see page 17). Section two To be competed by the empoyer Amost a empoyers must fie empoyee starter information oni Guidance for empoyers who must fie onine can be found at ww Empoyers exempt from fiing onine shoud send this form to the can be found in the E13 Empoyer Hepbook Day to day payro. Empoyee's detais Date empoyment started DD MM YYYY Job tite Getting P46 information from your empoyee Your empoyee must give you the P46 information before their first payday. It is important to make sure that you send us the correct information about your empoyees. Aways try to check the information you need from an officia source ike a birth certificate, passport or officia documents from HMRC or the Department of Work and Pensions (DWP). Empoyer's detais Empoyer PAYE reference Office number Reference number / Empoyer name Tax code used If you do not know the tax code to use or the current Nationa ower earnings imit, go to Enter 'X' in the appropriate box Box A Emergency code on a cumuative basis A Box B Emergency code on a non-cumuative Week 1/Month 1 basis B Box C Code BR uness empoyee fais to compete section one then code 0T Week 1/Month 1 basis C For empoyees who compete Box A or Box B starter notific ower earnings imit. 16 New Empoyer Hepine

17 P11 Taking on an empoyee without a form P45 You can either ask your empoyee to: : Empoyee without a form P45 m P45 from your previous empoyer. Your empoyer may ask you er format. If you ater receive your P45, hand it to your present Date of birth DD MM YYYY Address House or fat number Rest of address incuding house name or fat name compete section one with their persona detais which must incude their date of birth and gender read statements A, B and C and enter a X in the one that appies read the Student Loans section and tick box D if it appies. Getting started Postcode Student Loans (advanced in the UK) If you eft a course of UK Higher Education before ast 6 Apri and received your first UK Student Loan instament on or after 1 September 1998 and you have not fuy repaid your Student Loan, enter 'X' in box D. (Do not enter X in box D if you are repaying your UK Student Loan by agreement with the UK Student Loans Company to make monthy payments through D your bank or buiding society account.) Signature and date I confirm that this information is correct Signature You wi find a form P46 in the fi in forms section in the Basic PAYE Toos. Or, ask your empoyee to give you a the information detaied in section one. You can get this information either by emai or on your own stationery but you must keep an audit trai to confirm how this information was obtained. You can decide whether you need a signature for your own purposes. If your empoyee does not know their Nationa Insurance number we wi automaticay trace their number and et you know what it is. Date DD MM YYYY 2 0 ge 1 HMRC 01/11 Exceptionay, if your empoyee has not given you this information in time for their first payday, do not deay sending us the P46 information. Compete one of the statements on the form P46 on behaf of your empoyee, use tax code 0T on a week 1 or month 1 basis and send the P46 information to us on the empoyee s first payday. ne at w.businessink.gov.uk/payingnewempoyees ir HM Revenue & Customs office on the first payday. Guidance Works/payro number and department or branch (if any) Student Loan deductions If you need to make Student Loan deductions (in accordance with the P46 information suppied), phone the New Empoyer Hepine and they wi te you what you need to do. Address Buiding number Sending P46 information to HMRC You must send us P46 information on your empoyees first payday. Rest of address Postcode Insurance contributions (NICs) andthreshods Tax code used If Week 1 or Month 1 appies, enter 'X' in this box ation is not needed unti their earnings reach the NICs Amost a empoyers are required to send their P46 information onine. There are very few exceptions to this, see page 19. If you are exempt from the requirement to fie onine you may send us a paper form P46. Pease see the Empoyer Hepbook E13(2012) Day-to-day payro for information on how to compete and submit a paper form P46. You must be registered for PAYE Onine for Empoyers to fie the P46 onine. For further information see page 20 or go to e 1 If box A or box B has been ticked do not send the form P46 unti your empoyee s earnings are equa to the Nationa Insurance Lower Earnings imit (LEL) of 107 per week or 464 per month

18 P11 Taking on an empoyee without a form P45 Getting started Fiing in a P46 continued Which tax code to use The foowing tabe wi give you the tax code to use based on the information given by your empoyee. If you are using the P11 Cacuator in the Basic PAYE Toos the tax code wi automaticay be given when you input the P46 information. On the form P46 Tax code to use Box A ticked 810L cumuative Box B ticked 810L week 1 or month 1 Box C ticked BR cumuative uness empoyee fais to compete section one then code 0T week 1/month 1 basis No box ticked 0T week 1 or month 1 You wi use this tax code when you set up your payro records form P11 Deductions Working Sheet. (Don t worry if you don t understand the code numbers at the moment, these wi be expained in detai ater.) Once you have determined your empoyee's tax code you are ready to set up your payro and work out how much tax and NICs to deduct from their pay, see page New Empoyer Hepine

19 Do it Onine Do it Onine Amost a empoyers are required to send their Empoyer Annua Return (P35 and P14s) and empoyee starter and eaver information (P45 and P46) and simiar pension information onine. There are very few exceptions to this. Ony the foowing empoyers have the option of fiing their Empoyer Annua Return and starter/eaver/pension information either onine or on paper: a) Empoyers entited to operate PAYE using our simpified deductions scheme for persona and domestic empoyees (using forms P12 and P37) - as ong as they haven t previousy received a tax free payment for onine fiing. b)practising members of reigious societies or orders whose beiefs are incompatibe with the use of eectronic methods of communication. c) 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 returns themseves and not have someone ese (such as a reative or accountant) fie on their behaf. If you are in category b) or c) and want to fie on paper you must write to the HMRC empoyer office giving detais of why you consider yoursef exempt from fiing onine. Our records can then be updated and it wi avoid you receiving a penaty notice for not fiing your returns onine. See the foowing hepbooks for further information - E10(2012) Finishing the tax year to 5 Apri 2012 and E13(2012) Day-to-day payro. If you have not aready registered and enroed for our PAYE Onine service you must do so now so that you can fie your forms and returns onine. Pease do not send us any forms or returns on paper or you may be charged a penaty. Getting started

20 Do it Onine Getting started Do it Onine continued When you register for PAYE Onine for Empoyers you are given instant access to the Direct Debit Onine service. This aows you to set up a Direct Debit Instruction that you can use to pay your monthy or quartery PAYE and NICs payments. You can send and receive forms and returns onine using: our PAYE Onine for Empoyers Internet service. You can choose either the P11 Cacuator in the Basic PAYE Toos. If you are using the cacuator for up to and incuding nine empoyees at 5 Apri you can send your Empoyer Annua Return (P35 and P14s) onine. You can aso send us your P45 and P46 starter and eaver forms onine from the P11 Cacuator our free 'Onine Return and Form PAYE' product (this is designed for sma empoyers who have fewer than 50 empoyees and do not send arge numbers of forms to us), or third party (commercia) payro software Eectronic Data Interchange (EDI) - more suitabe for arge empoyers. An agent or payro bureau can fie onine on your behaf using our 'PAYE Onine for Agents' service. Before you can fie or pay by Direct Debit, you need to register with us. When you register you are given immediate access to Direct Debit Onine. For more information: go to and seect 'Register for PAYE Onine for Empoyers', or refer to the Basic PAYE Toos it has a earning package on a aspects of PAYE Onine. 20 New Empoyer Hepine

21 Setting up your payro Setting up your payro You wi now need to set up your payro. When you pay someone for the first time you must keep a record of a the payments you make and cacuate the tax and NICs to deduct from these payments. You must record this information each time you make a payment. If you are going to operate your payro yoursef you wi need to prepare and maintain a P11 Deductions Working Sheet (or equivaent record) when: Getting started you pay your empoyee * 107, or more in any week (NICs weeky LEL) * 464, or more in any month (NICs monthy LEL), or your empoyee has given you a form P45 with a date of eaving in the current tax year, or you have paid your empoyee and you have to operate tax code BR or 0T in accordance with the P46 procedures, see pages 16 to 18, or you have paid your empoyee and HMRC has sent you a tax code. * (If your pay period is other than weeky or monthy pease phone the New Empoyer Hepine.) If your empoyee has worked for you previousy in the tax year you must compete a new form P11 Deductions Working Sheet for their atest spe 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. The P11 Deductions Working Sheet is a doube-sided form. The eft-hand coumns are used to record NICs and the right-hand coumns to record tax deductions. You must use a separate form for each empoyee. The iustration on pages 52 and 53 shows an exampe of a manua form P11 Deductions Working Sheet. If you are using the P11 Cacuator in the Basic PAYE Toos you do not need to order a manua P11 Deductions Working Sheet. If you are operating a manua payro you wi need to order a paper P11 Deductions Working Sheet from the Empoyer Orderine

22 Setting up your payro Getting started Using the Basic PAYE Toos to run your payro If you are going to operate the payro yoursef there are three ways to compete a form P11 Deductions Working Sheet. This is the easiest and quickest way to compete a form P11 Deductions Working Sheet. The P11 Cacuator wi: work out the tax deductions, Student Loan deductions and NICs for you compete the on-screen equivaent of the paper P11 Deductions Working Sheet aow you to save the detais on your computer and update the P11 Deductions Working Sheet each time you pay your empoyee aow you to send your Empoyer Annua Return onine if you have up to and incuding 9 empoyees. You must downoad the Basic PAYE Toos to use the P11 Cacuator. Using the manua tax and NICs tabes and a paper form P11 If you are competing a paper form P11 Deductions Working Sheet and are not using the Basic PAYE Toos you wi need to cacuate the tax and NICs using the tax and NICs tabes. If you have decided to use the P11 Cacuator in the Basic PAYE Toos pease go to page 23. If you have decided to use the manua tax and NICs tabes pease turn to page New Empoyer Hepine

23 Using the Basic PAYE Toos to run your payro What s in the Basic PAYE Toos The Basic PAYE Toos contains cacuators to hep you run your payro. If you are not using payro software, this is the easiest and quickest way to maintain your payro. The Basic PAYE Toos contains: the P11 Cacuator which works out the tax and NICs for each empoyee every pay period and has been deveoped with the sma empoyer in mind. If you are using the P11 Cacuator for up to and incuding 9 empoyees at 5 Apri you wi be abe to send us forms onine straight from the P11 Cacuator an empoyer and empoyee database for keeping detais such as Nationa Insurance numbers, dates of birth and home addresses interactive forms that wi pre-popuate from the database and wi do the cacuations for you a range of cacuators that work out, for exampe, statutory payments a Learning Zone which contains teach yoursef packages on a wide range of payro tasks. The foowing pages in this section show you how to set up the database and how to use the P11 Cacuator. This section aso outines: Using the Basic PAYE Toos the information you need from your new empoyee how you can send us their information onine how you can cacuate their tax and NICs each time you pay them, and how you can cacuate how much to pay HMRC each month

24 Using the Basic PAYE Toos to run your payro Using the P11 Cacuator You can cacuate and record PAYE tax and NICs using the P11 Cacuator in the Basic PAYE Toos. What does the P11 Cacuator do? The P11 Cacuator: works out and records each empoyee's tax deductions, Student Loan deductions and NICs competes a reevant coumns on the P11 Deductions Working Sheet for you Using the Basic PAYE Toos produces an up-to-date P11 summary gives you the detai you wi need to compete your End of Year Return gives a summary of amounts of tax and NICs due to HMRC each month on the P32 Empoyer Payment Record can save your payro data to a spreadsheet. Due to continuing improvements the screens in the Basic PAYE Toos may ook different to those shown within this hepbook. 24 New Empoyer Hepine

25 Using the Basic PAYE Toos to run your payro Preparing to use the P11 Cacuator Before you can use the P11 Cacuator you must first set up your Empoyer Database. You can access the foowing areas from the Empoyer Basic PAYE Toos Home Screen. The Empoyer Database. The P11 Cacuator is in the Cacuators section on the Home Screen. Using the Basic PAYE Toos You wi need the foowing detais to set up the database. Empoyer detais Name and address. PAYE reference. Accounts office reference. Empoyee detais Name and address. Nationa Insurance number. Nationa Insurance category etter (see page 56 for more on this). Tax code. Date of birth. Their P45 or competed form P

26 Using the Basic PAYE Toos to run your payro Preparing to use the P11 Cacuator continued You wi aso need to enter frequency of pay, (for exampe weeky or monthy paid), a works/payro number (if appicabe) and empoyment start date if they started on or after 6 Apri 2012, pus detais of previous pay and tax if the new empoyee has given you a P45. The foowing pages describe the process for setting up an empoyer and empoyee database. You can aso view a demonstration in the Basic PAYE Toos. Seect the 'Hep' section then seect 'How to use the Basic PAYE Toos'. Using the Basic PAYE Toos You can access the Empoyer Database from the main menu on the Home Screen or from the P11 Cacuator. Seect 'P11 Cacuator' and then seect 'Add an empoyer'. 26 New Empoyer Hepine

27 Using the Basic PAYE Toos to run your payro Add your empoyer name and address then seect 'Next' to add your Empoyer PAYE reference and accounts office reference. You wi find your Empoyer PAYE reference and accounts office reference on the etter that we sent you when you first registered. Seect 'Next' to save your detais. Using the Basic PAYE Toos

28 Using the Basic PAYE Toos to run your payro Preparing to use the P11 Cacuator continued You now need to add your empoyee(s) to the database. Seect 'Add an empoyee'. Using the Basic PAYE Toos 28 New Empoyer Hepine

29 Using the Basic PAYE Toos to run your payro Once you have entered name, gender and date of birth, seect 'Next'. Now add the empoyee s Nationa Insurance number and address and seect 'Next'. Using the Basic PAYE Toos QQ123456A

30 Using the Basic PAYE Toos to run your payro Preparing to use the P11 Cacuator continued If appicabe, add a works number, department or job tite, then seect 'Next'. If they don t appy to this empoyee eave these fieds bank and seect 'Next'. Using the Basic PAYE Toos 30 New Empoyer Hepine

31 Using the Basic PAYE Toos to run your payro You want to use the P11 Cacuator for this empoyee so seect 'Yes' to 'Use this empoyee in the P11 Cacuator' then seect 'Next'. Empoyee pay period Start date You must now add the foowing detais about your empoyee. Seect the pay period for your empoyee, either weeky paid, two-weeky, four-weeky or monthy. If your empoyee started on or after 6 Apri 2012 enter the date they started, otherwise eave this fied bank. Using the Basic PAYE Toos If you have entered a start date you wi then need to seect from the foowing: the empoyee has given you a P45 Part 3 competed by their previous empoyer the empoyee has given you a competed P46, or a P46(Expat). The empoyee must give you a P46 if they don t have their P

32 Using the Basic PAYE Toos to run your payro You wi need either their P45 or a competed P46 to continue. For the purposes of this exampe we wi assume your new empoyee has given you a P45 Part 3. Seect 'Next' to continue. Using the Basic PAYE Toos From the empoyee s P45 enter the tax code, indicate whether or not the code was operated on a week1/month1 basis and their date of eaving. You wi need to indicate if the empoyee s first payday is on or after 6 Apri In the majority of cases this won t be the case. 32 New Empoyer Hepine

33 Using the Basic PAYE Toos to run your payro From the empoyee s P45 enter the month or week number and the tota pay and tax to date. The P11 Cacuator wi then carry out a tax tabe check on the tax due figure. The correct tax due figure wi then be incorporated within the P11 Summary. Now seect 'Next'. Now enter the previous Empoyer PAYE reference then seect 'Next'. Using the Basic PAYE Toos

34 Using the Basic PAYE Toos to run your payro Tax code In the case of a new empoyee starting with you on or after 6 Apri 2012, the tax code fieds wi be pre-popuated. Using the Basic PAYE Toos Week one/month one basis If the empoyee is an existing empoyee you wi need to enter the tax code you have been using to date. If you are unsure of what tax code to use phone the New Empoyer Hepine on If the tax code is foowed by 'week 1', 'month 1' or 'X' you must seect 'Yes' to this question, otherwise eave as 'No'. There are severa different NICs categories. For most men and women aged 16 or over and under State Pension age, category A NICs appy. NICs category Student Loan deductions If you are unsure which Nationa Insurance category etter appies, go to If you are sti unsure which etter appies, phone the New Empoyer Hepine on The Nationa Insurance category etter is not the check character at the end of the empoyee s Nationa Insurance number. Pease note that category etters F, G and S wi no onger be accepted from Apri For further information about changes to contracting-out from Apri 2012 pease go to Seect 'Yes' if you have received a form SL1 Start Notice, or for new empoyees who have given you a form P45 with an entry in box 5 'Student Loan deductions to continue'. If your new empoyee does not give you a form P45 they shoud compete a form P46. If they have ticked the Student Loan box of form P46 seect 'Yes'. 34 New Empoyer Hepine

35 Using the Basic PAYE Toos to run your payro Is this empoyee a director? Indicate whether the empoyee is a director and then seect 'Next'. Directors ony Nationa Insurance cacuation method If you seected 'Yes' to the previous question 'Is this empoyee a director?' you wi be asked for the foowing information. Cacuate as a norma empoyee This method cacuates NICs as a norma empoyee (non-cumuativey) subject to the conditions set out on page 7 in the Empoyer Hepbook CA44 Nationa Insurance for Company Directors. And if you use this method the P11 Cacuator wi carry out an Annua Earnings Period check when the ast payment is made for the tax year, or when the directorship ceases if earier. This is done to ensure the director has paid the correct amount of NICs for the year. Using the Basic PAYE Toos

36 Using the Basic PAYE Toos to run your payro Directors cumuative NICs This method cacuates NICs cumuativey for the director throughout the year using an annua or pro rata annua earnings period. Using the Basic PAYE Toos Date appointed You can find more information about NICs for directors in the Empoyer Hepbook CA44 Nationa Insurance for Company Directors. If the empoyee was not a director at the start of the tax year enter the date appointed or joined the business here, then seect 'Next' If you have registered with HMRC Onine Services you can send the P45 Part 3 onine, but must be connected to the Internet at this point. You must aso have your username and password to hand. Seect 'Finish' when you have chosen whether to send the P45 Part 3 now, ater or not at a. 36 New Empoyer Hepine

37 Using the Basic PAYE Toos to run your payro A the empoyee detai wi now be summarised. QQ123456A If you want to use the P11 Cacuator for additiona empoyees seect '+' in the empoyee menu on the eft-hand side of the screen and work through the 'Add an empoyee' process again, from page 28. Using the Basic PAYE Toos QQ123456A

38 Using the Basic PAYE Toos to run your payro You are now ready to use the P11 Cacuator. QQ123456A Using the Basic PAYE Toos P11 Cacuator Firsty seect the empoyee you want to use the P11 Cacuator for by seecting the down arrow next to the first empoyee name to expand your ist. QQ123456A 38 New Empoyer Hepine

39 Using the Basic PAYE Toos to run your payro Next seect the P11 Cacuator to expand this menu option. Next seect 'Enter Pay Detais'. Pay detais You must now enter the: payment date gross pay during this pay period gross pay for NICs if it is different. If you pay anything other than saary, wages, overtime, bonuses or commission the gross pay for NICs may be different. For more information see pages 58 to 61 of the CWG2 Empoyer Further Guide to PAYE and NICs. You can find the CWG2 at Do not make an entry in this box (eave it bank) uness the gross pay for NICs is different to the 'Gross pay this period'. If you are unsure what to incude in any of the boxes, ook in the '?' symbos for more information. You must now indicate whether you have received a P6 coding notification. The P6 tes you when your empoyee s tax code has changed. If you have received a P6, turn to page 43 for further information. If you have not received a P6, eave as 'No' and seect 'Next'. Using the Basic PAYE Toos

40 Using the Basic PAYE Toos to run your payro Pay detais continued Now enter detais of any statutory payments paid to your empoyees during this pay period. Leave these boxes bank if they do not appy. Using the Basic PAYE Toos If a Student Loan deduction needs to be made the amount wi appear on this screen. If you woud ike to know more about these topics, you wi need to downoad the Learning Zone from the Basic PAYE Toos or phone the New Empoyer Hepine. Now seect 'Next'. 40 New Empoyer Hepine

41 Using the Basic PAYE Toos to run your payro This is the confirmation page that summarises the detais you have entered for your empoyee during this pay period. If the detais are incorrect seect 'Back' to re-enter the correct information. When you are certain that the information is correct seect 'Save to P11' to transfer the detais onto the P11 Summary. QQ123456A The first page of the P11 Summary show entries reating to NICs, statutory payments and Student Loan deductions. Using the Basic PAYE Toos Seect the 'PAYE Income Tax' tab to view the second page of the P11 which shows the tota gross pay and entries reating to PAYE tax deductions. QQ123456A

42 Using the Basic PAYE Toos to run your payro Pay detais continued As you continue to pay your empoyee throughout the year, the P11 Cacuator wi: Using the Basic PAYE Toos Change of empoyee s tax code work out the PAYE tax and NICs to deduct for each pay period, and compete the P11 entries for you give you an end of year summary with a the detai you wi need to compete your End of Year Return. If your empoyee s tax code changes during the tax year your HMRC office wi send you a form P6. The P6 ooks ike this. Empoyee's name Nationa Insurance number Works or payro number Tax code This empoyee's code is amended to Empoyer PAYE reference Pease use this reference if you write or ca. It wi hep to avoid deay. Issued by This is a notice of your empoyee's tax code (or amended code) and previous pay and tax. You shoud use this tax code for the tax year shown beow. White Mrs M Q Q A 747L Pease use this tax code from the next pay day for the year to 5 Apri 2012 Pease read the notes on the back of this form. Previous pay and tax Previous pay Previous tax P6 HMRC 06/09 When you receive a form P6, use the tax code on it from the first payday after you receive it uness your HMRC office tes you otherwise. 42 New Empoyer Hepine

43 Using the Basic PAYE Toos to run your payro You must enter the revised tax code onto the P11 Cacuator. To do this, you wi need to seect Change Tax Code from Empoyee Detais. Using the Basic PAYE Toos

44 Using the Basic PAYE Toos to run your payro Change of empoyee s tax code continued You must now enter the revised tax code, incuding previous pay and tax detais (if any), shown on the P6, see exampe beow. If there are no pay and no tax detais on the P6 eave the 'Tota pay to date' and 'Tota tax to date' fieds bank. Then seect 'Next'. Using the Basic PAYE Toos You must now: enter detais of any statutory payments and seect 'Next' confirm your entries are correct and if so, seect 'Save to P11'. 44 New Empoyer Hepine

45 Using the Basic PAYE Toos to run your payro The P6 detais wi now be incorporated. The tax code wi be updated in the database and any pay and tax from a previous empoyment wi be incuded in the current pay period s figures to give you a revised amount of tax due. QQ123456A P32 empoyer deductions summary The P32 Summary wi tota a your empoyees PAYE tax, NICs and Student Loan deductions for each tax month and show what is due to HMRC. Important note: The P32 Summary wi ony incude detais reating to empoyees entered on the P11 Cacuator. Using the Basic PAYE Toos Where to find the P32 Summary The P32 Summary is found within the main Empoyer menu. Seect 'P32 Deductions Summary'. There are a number of options, but before you can work out what is due to HMRC you must first create a P32 entry

46 Using the Basic PAYE Toos to run your payro Create a P32 Entry Seect 'Create a P32 Entry'. Using the Basic PAYE Toos This wi show the tota PAYE tax, Cass 1 NICs and any Student Loan deductions from a P11s for the empoyer chosen. The P32 wi buid a record month by month starting at month 1. But it wi not skip a month, so if you have entries in months 1 and 3 and none in month 2 you must sti create a 'ni' entry for month 2. This screen aso has an entry for 'Income Tax Subcontractor Deductions', in case you need to add these to your record. Either eave bank or enter the reevant detais then seect 'Next'. 46 New Empoyer Hepine

47 Using the Basic PAYE Toos to run your payro On this screen you can enter any statutory payment recoveries and compensation. Recovered statutory payments and compensation are deducted from your monthy Nationa Insurance and PAYE iabiity. Leave bank or enter detais then seect 'Next'. The P32 Deductions Summary wi be dispayed. Using the Basic PAYE Toos

48 Using the Basic PAYE Toos to run your payro View P32 Deductions Summary Seect this option to view the P32 Deductions Summary you have created to date. Using the Basic PAYE Toos Deete the ast P32 Entry If you make a mistake and need to amend your P32 Deductions Summary, you can do this by seecting 'Deete the ast P32 Entry'. If you need to amend an entry before the ast one, you wi need to deete a entries going back to the month in question. You wi then need to re-enter a deeted entries by 'Creating a P32 Entry' for a the months you have just deeted. 48 New Empoyer Hepine