Why small business PAYE needn?t be as daunting as you think
Pay As You Earn (PAYE) is HMRC?s method of tax collection whereby an employer deducts Income Tax and National Insurance contributions before paying an employee their wages. PAYE is an important part of the payroll process. The fact that these sorts of calculations and deductions are left down to the employer leaves some business owners scratching their heads. ?The biggest challenge we face with payroll is paying the associated taxes on top of salary costs ? I know I?m far from alone amongst small business owners in feeling frustration with our complicated business tax code,? said Rob Liddiard, co-founder and CEO of messaging app, Yapster. Every month, businesses must pay HMRC National Insurance and any other deductions ? these can include things like pensions and student loan repayments. It can be made even more confusing when employees don?t know what is required of them for the process to go smoothly. Lindsay Woolf, virtual PA to Michael Scantlebury, creative director at Impero, explained: ?The biggest challenge I face is getting the right receipts from people, they don?t seem to understand the importance of a VAT receipt. Basic credit/debit card slips aren?t helpful, and neither is it when receipts are lost or forgotten at the point of purchase. ?Another struggle is managing the staff’s company credit cards. Getting everyone to manage and submit them on time can be a nightmare. Also ensuring they provide the correct information such as the reason for the spend, logging it under the right budget code and of course, not losing the receipt ? always a challenge.? If card charges aren?t exempt, they must be reported to HMRC. Sometimes, you may have to pay national Insurance on them ? you can find more information about card charges here. In fact, it?s really not unheard of for business owners to feel initially daunted by small business PAYE and tax codes. So, what?s the solution? Top tips for tackling small business PAYE There?s no getting away from it ? PAYE is tricky. Many business owners decide not to handle it all in-house, and outsource to accountants or invest in software to automate it. This might sound costly, but in the long run can be well worth it to keep a business running smoothly. Here are some of the top tips the business community had to offer for getting a grip on payroll. 1. Keep up to date ?Being organised and having a clear payroll timetable and checklist can make the task seem much more simple and achievable,? said Peter Tuvey, co-founder and CEO of revenue-based finance provider Fleximize. ?It also helps if you keep up to date with new legislation and are aware of changes or new requirements before they happen.? 2. Get help ?Having an accountant who can help advise/handle PAYE is essential. But if that is not an option for you accounting software does make it a little easier, once you have the information you need such as the employee’s tax code. The government website and online income tax calculators can be really useful,? said Woolf. 3. Don?t leave it too late ?It?s essential that businesses move away from the old-school way of using spreadsheets to a cloud-based solution ? limiting the room for mistakes or lost documentation. ?The most common mistakes made by small business owners are leaving it too long before updating their books and inaccurate and inconsistent bookkeeping,? said Raj Sond, GM of First Data UK. Ultimately, just don?t bury your head in the sand. It?s difficult, and if you don?t have a head for numbers it can seem like the most daunting part of a business ? but there are a lot of ways to get help. You can try speaking to your accountant, or using online resources such as the government?s website, or blogs. Ultimately, automating small business PAYE will free up time in a business owner?s hectic schedule for other aspects of the business ? in the long run, investing in accountancy software could spare your bottom line. For more information on PAYE, click here.
Letitia Booty is a special projects journalist for Business Advice. She has a BA in English Literature from the University of East Anglia, and since graduating she has written for a variety of trade titles. Most recently, she was a reporter at SME magazine.