PAYE

PAYE turns each payday into an HMRC report

PAYE is the system most employers use to report pay and deductions to HMRC. Payroll works out the employee's Income Tax and National Insurance, the employer's own National Insurance liability and any other amounts that must be reported.

The employer normally sends a Full Payment Submission on or before payday. The GOV.UK PAYE overview explains when an employer must register and which payments and deductions pass through payroll. Registration is not the end of the job: every run needs the right people, figures and dates.

Start with the right employee details

A correct run depends on the information behind it. Record the person's start date, tax details, pay, pension treatment and any change that affects payroll before the cut-off. A late starter, old tax code or missed pay change can flow through the report and the employee's payslip.

Use payroll software that can submit PAYE information, but keep responsibility with a named person. The HMRC reporting guidance sets out the reports and timing to check for each run.

Reconcile the report and the payment

The amount deducted from employees is not the whole PAYE bill. Employer National Insurance and other amounts can also be due, while statutory-payment recoveries can reduce what the employer pays HMRC.

Compare the payroll totals with HMRC's stated liability before paying it. Then record the payment against the same period. If HMRC's figure differs, trace the submission or correction instead of changing a payslip to make the totals appear to agree.