Doing your own payroll, especially during busy times of the year such as Christmas can be incredibly stressful. You need to pay people on time, but before that there is a lot of work that goes into staying compliant with HMRC and employment laws.
We will be going into depth to explore how a small business owner in Worcestershire can set up their own payroll. There are plenty of resources online on this matter, and even more on less common circumstances like bereavement and maternity leave you need to follow. We will explore the most basic and simplified version of paying your employees and setting up your business for success.
We have seen many small businesses across Worcestershire ask this very question. Setting up your own payroll is not a one-and-done situation, as it’s something that needs regular checks and ongoing submissions to specific deadlines. This is why most businesses in the UK without an internal accountant, outsource their payroll to businesses like JR Management Accountancy.
Having a reliable, outsourced payroll provider means you do not have to worry about keeping up to date on HMRC requirements. If it is relevant, the accountant will inform you and make the necessary changes for the future. However, even when payroll is outsourced, the owner or manager will still need an involvement in payroll, for example, to communicate details of new hires, changes in rates or circumstances like sickness (SSP) or maternity pay.
If it’s just you in the business, you will still need your own payroll if you want to be paid, as there are tax implications for owners withdrawing money from a company. A good accountant will help you customise your payroll for your business. Remember that a payroll can include many pay elements not just fixed monthly payments, such as hourly pay, overtime, holiday pay or bonuses.
If you are determined to do your own business’s payroll, here is our guide for UK businesses.
If you’ve never had a payroll before, you need to register as an employer with HMRC to create a PAYE scheme. PAYE stands for Payment As You Earn, so that employees are taxed at source with a payment to HMRC every month, rather than having to complete a self-assessment tax return at the end of the year and pay all the tax in one go. Anyone with more complex earnings may have to do a self-assessment as well as paying tax through the payroll to remain compliant, for example, if they have additional income streams such as dividends. Check with your local accountant and never assume nothing needs doing.
Note that you cannot pay yourself or others until you have registered, and we recommend registering in plenty of time to allow for systems to catch up, and to receive your necessary reference numbers. HMRC will provide you with two reference numbers, - a PAYE reference number AND a payment reference number and it is important that you receive both of these
There are plenty of credible and reliable payroll software online, and at JR Management Accountancy, we use Payroll Manager provider by Moneysoft. Learning how to navigate an accounting software is another skill when doing your own payroll. Each software has a different way of submitting payroll reports, pensions and even sending out payslips. We recommend getting trained by an accounting expert, so you have a better understanding of how to conduct your own payroll.
Not every payroll software fits all businesses, especially the smaller sized ones from 1 to 60 employees. It’s better to do conduct thorough research to see if the program fits your business structure or ask an accountant for advice.
It is vital that any document or information regarding payroll is private, this includes adding passwords to documents if you’re sending confirmations through e-mails. This is to keep compliant with the GDPR legislation, and to also make sure your business runs smoothly without data breaches and keeping your employees happy.
You need to keep employee information for up to 6 years from the end of the tax year they relate to. After that, the information needs to be disposed of effectively and confidentially, this includes physical documentation. Although, with the Making Tax Digital (MTD) changes, most employers keep their records online.
So, you’ve registered yourself as an employer, chosen your payroll software, and are ready to keep important information secure. It’s time to collect information on your new employees such as NI numbers, dates of birth, full address, any student loans, rates of pay and tax-important information. With the correct employee information in place and being set up as an employer in the government system, you can pay contributions
Here is where setting up your own payroll can get complex. For any deductions, and changes as you start to pay your employees, you need to save and be able to explain past data. This is where payroll trends can be incredibly useful, by using a data protected spreadsheet to check for any anomalies, or to answer questions relating to previous month’s pay.
HMRC wants to ensure that you are paying your employees legally, and that the tax correlates to exactly what you say. This becomes more complex when you are also paying expenses like mileage or travel allowances. Stay compliant, and if you do not know how to accurately pay an employee’s expenses, ask an accountant for further reassurance.
If you have employees, it is likely that you will need a pension scheme to adhere to auto-enrolment. So, you will need to register with a pension provider and with the Pensions Regulator. Once registered, you will need to make monthly pensions deductions from your employees, and make pension contributions from the company and pay these over to the pension provider regularly. Again, keeping good records so that even when an employee leaves a workplace, you can respond to any queries that they may ask on how much you paid.
So it is key that all information being put into the payroll system is correct, that includes age, previous employment and contributions. We have also written a specific process about when to set up the auto-enrolment system, and many other tips in managing payroll for the first time.
We are more than happy to set up your business payroll and even manage it for you. We also provide training, so we can train up you or an employee so you can do it in-house. However, exercise caution, and always send it securely to your outsourced accounts department for confirmation.
It is not an easy process, but it is the most important one within a small business. At JR Management Accountancy, we can set up your payroll for you, and make sure your business is running with full compliance. In our experience, payroll is a skill that evolves, as is with HMRC and UK laws. Know that your books and payroll are sorted every month, so you can focus on building your business.
Please contact us on 01905 796512 or email us at info@jrma.co.uk, describing your business needs or just ask us for advice. We cater our services to every local business, so let us learn more about you by booking a free consultation with a member of our reliable team.
