馃攳
The Basics of Payroll | Small Business, Freelancers and Entrepreneurs - YouTube
Channel: Accounting and Tax Academy by Tony D
[0]
are you looking to understand a bit more
[1]
about payroll and the PA uie system here
[5]
in the UK are you looking to understand
[8]
more about the deductions of tax
[9]
national insurance pensions and other
[12]
deductions perhaps how you get to your
[14]
net pay on your pay slips tax codes and
[16]
those kind of things are you an employer
[19]
entrepreneur freelancer or director
[21]
who's responsible for running payroll
[24]
for your staff then look no further than
[26]
this video today I'm going to go through
[28]
the basics of payroll in the PA way
[30]
system and just that little bit more
[33]
[Music]
[52]
now if I was to explain what payroll
[55]
actually means I'm gonna use five simple
[57]
steps here number one this is a process
[61]
in order to calculate and report an
[63]
employee or employees pay
[66]
number two is to actually then calculate
[68]
and report on their deductions namely
[71]
tax and national insurance number three
[74]
is to then report on the employers
[76]
national insurance this is what the
[78]
business owners or directors of the
[80]
company have to pay in terms of national
[82]
insurance and before is to produce and
[85]
send your employees payslips on a
[87]
regular basis most often monthly and
[91]
number five is to report all of this to
[93]
HMRC again on a regular frequency quite
[96]
often monthly now the first
[99]
consideration in particular if you're a
[101]
director entrepreneur freelancer or
[103]
business owner is how often and for what
[106]
periods payroll needs to be run for now
[108]
you may be running payroll for yourself
[110]
as a director salary or a business owner
[112]
salary or you may be doing it for your
[115]
employees but the crucial thing here is
[117]
you've got to understand what a tax
[119]
period is now in terms of payroll and
[122]
the PAYG system the tax period differs
[124]
from a calendar month so for example if
[127]
you're paying your employee two thousand
[129]
pounds in the month of January and your
[131]
intention is to pay them from the 1st of
[133]
January to the 31st of January for
[135]
services procured in that period the tax
[137]
period does not marry that the tax
[139]
period actually runs from the sith of
[141]
the month to the 5th of the month so in
[143]
this example the tax code period is the
[145]
sixth of January to the 5th of February
[148]
and that's how the PAYG system works and
[152]
also the other key thing is regular
[154]
practices that payroll and the piyu
[156]
system is run on a monthly basis now
[158]
that's a pretty normal practice but
[161]
contrary to believe it does not mean
[163]
that that's what you have to do you
[165]
can't actually run payroll weekly it can
[167]
be done daily but it also can be done
[172]
yearly sent me only by annually so
[174]
actually there's no defined period but
[177]
the key here is you want to keep it Nia
[178]
entirely normally doing it monthly keeps
[180]
it tidy and your employees are happy if
[182]
you're doing your on a weekly basis
[184]
that's all well and good but that does
[185]
increase your administration if you're
[187]
doing it any less frequently than that
[189]
then these are rarer circumstances now
[192]
in order to run payroll if you employ a
[194]
business owner freelance and director is
[196]
you're going to need two logical bits of
[198]
information and that is and PA you ie a
[201]
reference number and an Accounts Office
[203]
reference number now what exactly are
[206]
these well your PA ye reference number
[208]
is obtainable from HMRC and this is your
[211]
unique reference number for your
[213]
particular business no matter how many
[215]
people you employ including yourself
[217]
this reference number has to be on every
[219]
single place that the return to HMRC the
[222]
Accounts Office reference number
[223]
actually indicates what accounts office
[226]
your business payroll is linked to HMRC
[229]
so this brings me on quite nicely to tax
[231]
codes now if for an employee or even an
[234]
employer what you may notice on pay
[236]
slips is a field called tax code and
[238]
quite often it consists of four digit
[241]
numbers and a letter now I'm going to
[243]
give you an example here most common tax
[246]
code used in this current tax year which
[248]
is a twenty to twenty one tax year is
[249]
one two five zero L here in the UK but
[253]
what exactly does that mean well let's
[256]
break it down the first four digits one
[257]
to five o signifies the level of your
[260]
personal allowance I eat the tax free
[262]
amount that you can earn in the air
[264]
without paying any tax of course one to
[267]
five o signifies twelve thousand five
[269]
hundred per annum the letter that
[271]
follows it signifies the level of
[273]
personal allowance or whether there's a
[275]
different variation so for example the L
[277]
simply means you're entitled to a
[279]
standard personal allowance if you had
[281]
an M after it it means you're then
[283]
entitled to not only just a standard
[284]
allowance but the marriage allowance as
[286]
well and so on and there are various
[289]
letters that can be added to the four
[291]
digits now time permits me to go through
[293]
each and every one here but if you
[295]
follow the link below in the description
[296]
it will take you to the gob co uk site
[299]
where we list out all the different tax
[301]
code letters and one of the things you
[303]
may want to do is just check that you
[305]
the correct tax code because if it is
[307]
currently incorrect you may just be
[309]
paying more tax than actually you should
[311]
be now on screen what I'm showing you
[313]
here is a classic example or the pace
[315]
fit and let's just I set this and go
[316]
through this very carefully now you can
[319]
see a couple of fields that I've already
[320]
explained previously number one it's a
[322]
tax code and there it is quite clearly
[324]
also the PAYG reference number and the
[327]
Accounts Office reference number two
[329]
it's also fuels on the name and national
[331]
insurance number of the particular
[332]
employee and you can also see two
[334]
additional fields one called tax period
[337]
and the other one called the payment day
[339]
now the tax period is what I explained
[341]
earlier it runs from the 6th to the 5th
[344]
of every month and that's how tax is
[346]
calculated in terms of deductions on
[348]
this pay slip and every single other pay
[350]
slip whereas the payment date is the
[352]
actual date that you intend and probably
[354]
will pay your employees or yourself and
[357]
that can differ from the tax state and
[359]
you can see in this example that payment
[361]
date is the 31st of May 2020 now that is
[365]
the day the employee got paid and that
[367]
is a day HMRC were notified about this
[370]
pay slip and more than likely this pay
[371]
slip will be sent out to the employee
[373]
and that brings me on to their dreaded
[376]
deductions
[377]
now the most common deduction as you can
[380]
see from this pay slip is tax and
[382]
national insurance now as I mentioned
[385]
previously it's really important to
[387]
double check that you've got the right
[388]
tax code so the right amount of tax is
[390]
being deducted on a monthly basis a
[392]
national insurance is what's called
[394]
class 1 employees national insurance
[396]
that is the national insurance related
[399]
to employees and what determines the
[401]
amount of national insurance you get
[403]
deducted is based on a category letter
[406]
the most common is a and again I'll put
[408]
a link in the description below that
[410]
explains all the different categories
[411]
and whether you are being deducted the
[414]
correct amount of national insurance but
[416]
it doesn't stop there there are various
[418]
other deductions that can be made
[419]
through your pay slips and through your
[421]
gross salary student loan deductions
[423]
pensions charitable giving child
[426]
maintenance payments are just a few that
[428]
can actually be deducted directly from
[429]
your pay slip and once all the
[431]
deductions are made you get to what's
[433]
called a net pay figure and that
[436]
pay is what physically gets paid to your
[438]
employee or if you're a director
[439]
freelancer entrepreneur you're paying
[441]
yourself - you know the question is how
[444]
can you run payroll and issue pay slips
[446]
on a frequent basis well there's a
[448]
plethora of different pieces of
[450]
accounting software out there that you
[452]
can possibly use and also HMRC have
[454]
developed their own unique software
[456]
which you can also use however I must
[459]
warn it is an individual on key so if
[462]
you are running payroll monthly what
[464]
you've got to decide is the payment date
[466]
and it's a payment date on which you
[468]
need to issue the pay slips make sure a
[470]
payment is made and report to HMRC using
[474]
the RCI return system that is real-time
[477]
returns and when you report HMRC there
[480]
are two types of returns that could be
[481]
made one is called an FPS and the other
[484]
is called an EPS now let me just focus
[487]
on the FPS to begin with so an FPS is
[490]
what's called a full payment submission
[492]
this is where quite often you are paying
[494]
your employees a significant amount
[496]
normally over 120 pounds a week and by
[500]
making this submission it goes into a
[502]
lot of details and HMRC receive all of
[504]
this and it must be done monthly but the
[508]
one thing to be aware of is late
[509]
submissions you've got to be very very
[512]
careful here if you make a submission on
[514]
or before the payment date you're
[516]
absolutely fine as long as it's before
[518]
the end of the tax month but if you're
[521]
light in doing that then you will more
[523]
than likely get subject to quite a hefty
[525]
fine and they can be up to four hundred
[527]
pounds
[528]
there are very few circumstances in
[530]
which HMRC will be lenient with late
[532]
submissions and if they've done
[533]
frequently then you're really going to
[535]
get into a lot of hot water so the other
[537]
type of return is what's called an EPS
[539]
that's an employer payment summary now
[541]
this doesn't have to be done every month
[543]
this only has to be done in certain
[545]
circumstances listed here on the screen
[547]
right now so once you've made your FPS
[549]
or EPS submission to HMRC through your
[552]
software then you've got to ensure that
[555]
they get their payment their tax and
[557]
national insurance payments and that you
[559]
must be made by the 19th or if you're
[562]
doing it online the 22nd of the month
[565]
from in the tax month hmm that's a bit
[568]
confusing
[569]
let me break it down let us say for
[571]
example your tax month is the 6th of
[573]
January to the 5th of February now
[575]
you've made the return on the 31st of
[577]
January because that's the day you paid
[578]
your employees not a problem then you've
[582]
got some tax and national insurance to
[583]
pay HMRC well you've got to make sure
[586]
you get that paid by the 22nd of
[588]
February at the latest it's got to reach
[591]
their bank account they normally say the
[592]
19th but you have got till the 22nd now
[596]
what happens if you make a mistake or
[598]
submit a late return mmm you see there
[602]
are exceptions in terms of sending a
[604]
light FPS report and it's hair on the
[606]
screen there's certain situations here
[608]
on the left and when to report on the
[610]
right but if you're not within these
[612]
exceptions then you are more than likely
[614]
going to get fined and the penalty
[616]
regime can be quite onerous don't forget
[618]
is a monthly penalty so if you do it
[621]
frequently you're going to get fined
[622]
that amount every single month
[624]
ouch so if you have 1 to 9 employees
[627]
that your monthly penalty is a hundred
[629]
pounds 10 to 49 it's 250 to 249 300 and
[634]
250 or more it's up to 400 pounds
[637]
that's quite a stink now the most
[640]
onerous thing about payroll is making
[642]
the mistake now it's more than likely
[644]
unintentional or accidental but the
[646]
consequences can be quite painful so for
[648]
example if you've entered the incorrect
[650]
gross salary or made the wrong
[651]
deductions or incorrectly filled in one
[654]
of the other bits of information and
[655]
you've actually submitted it to HMRC on
[657]
time well you're certainly not going to
[659]
get a penalty but if it turns out being
[661]
correct unwinding that is where the
[663]
problem actually lies and quite often it
[666]
involves picking up the phone onto HMRC
[669]
and untangling things in that way
[671]
alternatively you can actually
[673]
straighten out out and future bums but
[675]
that really does depend on your
[676]
situation and how your employees would
[679]
feel about that and finally what happens
[681]
if your employee or even your own
[683]
circumstances change and details
[685]
actually change now this actually
[687]
applies to new employees or employees
[690]
leaving all your circumstances or
[692]
details changing your pay going up your
[694]
pay going down your tax code changing
[696]
and all sorts of things but all sorts of
[699]
employee changes also
[700]
to be reported to HMRC and that also
[703]
includes the issuance of P 45s and P 60s
[707]
now if they sound like some sort of card
[709]
blue to you then I don't blame you but I
[712]
can't really go into in this video there
[714]
will be a future video that will explain
[715]
P 45s and B 60s once again I really hope
[719]
you found this video useful an
[721]
introduction to the basics of payroll in
[723]
the piyu system in the UK specifically
[725]
for you directors business owners
[727]
entrepreneurs freelancers and employees
[730]
out there and the golden nugget that you
[732]
really want to be taking is check your
[734]
tax code a wrong tax code could end up
[737]
in over paying tax unnecessarily and if
[740]
you would like some assistance with your
[742]
payroll or just want to get your tax
[743]
code checked out then there's a link
[745]
below here which you can click that will
[747]
hit our website and there is a service
[748]
that we offer for both so until the next
[751]
video I really really wish you a
[753]
wonderful day ahead
Most Recent Videos:
You can go back to the homepage right here: Homepage