This is a system HMRC uses to collect Income Tax and National Insurance on wages and salaries, as well as pensions and savings. It means most UK taxpayers don’t need to submit a Self-Assessment tax return.
People sometimes refer to an PAYE scheme as a Payroll Scheme. You may need one of these schemes if you have employees in your business, or you wish to pay yourself a wages or salary if you operate under a Limited company.
Each week or month you will need to run your payroll and submit various reports to HMRC informing them of what your employees have earned, how much you have taxed them and how much you will be passing over to HMRC.
The great news is that there are many payroll packages out there now which makes running your own payroll much easier than it used to be with pen and paper.
One other thing you will need to keep in mind if your want to employee people in your business is the requirement to offer a Workplace Pension. This is where you and the employee pay into a pension scheme so that your employee is building towards a more secure retirement.
From April 2019 onwards, employers need to contribute 3% of an employee’s wages or salary above a certain level into a scheme. On top of this, the employee needs to contribute 4% of their wage or salary above this level. After some Income Tax saving the employee then ends up with 8% of there pensionable wage or salary in a scheme which provides them with some incredible security into their retirement.