Payroll setup for limited company – Setting up and managing your payroll is crucial if you own a limited company. There are multiple options in this case: you either delegate the task to someone within your business, do it yourself, or you go with payroll outsourcing. Generally, outsourcing the payroll process is easier, and it will save you quite a bit of time. While you can use small business payroll solutions, here are the steps to follow if you want to set up the payroll by yourself.
Registering with the HMRC
You will need HMRC payroll compliance, and that means you have to register as an employer with the HM revenue and Customs. It’s important to do that even if you employ yourself as a limited company if you employ others or use subcontractors for construction work. You need to register before the first payday since it can take up to 30 days until you receive the PAYE reference number.
Once you register, you receive access to the PAYE online system. PAYE is helpful because it makes it easy for you to check any amount you owe, pay bills, see the payment history, access the tax codes/employee notices, but also receive HMRC alerts, and send expenses/benefits returns.
Select the payroll software.
Payroll software is necessary since it will help you record employee details, but it can assist you with pay calculation and deductions. Great payroll tools will also report everything to the HMRC, so you don’t have to do so manually.
When you choose payroll software, you will need to assess your needs and see what tools can offer what you need. Some software might not allow you to generate pay slips, record deductions, perform any pension payments, or offer your employees weekly payments. It’s also important to use HMRC-recognised software; you can find a list of supported payroll software here.
If you want to choose payroll software, you should look for the most important features you would need. Generally, you want to have:
- An easy-to-use, customisable interface
- Automation features
- Scalability
- Integrations with finance/business software
- Security features
- Data analytics and storage
- Report creation
- Compliance support
Collecting and keeping records
You will need to collect and also keep records of multiple things, including:
- Payroll Giving Scheme documents
- Tax code notices
- Taxable benefits of expenses
- Employee sickness and leave
- HMRC payments
- HMRC reports
- Deductions you are making
- What you’re paying your employees
Making sure that you keep the records for three years from the end of the tax year they pertain to is of the utmost priority. The HMRC might check your records at any time, so it’s crucial to ensure that everything is reported accurately. If records newer than three years are destroyed, stolen, or lost, then you need to try and recreate them but also report that to the HMRC as quickly as possible.
Inform the HMRC when you have a new employee.
The HMRC needs to know when you hire a new person, and there are a few things you need to focus on:
- If the employee earns £123 or more weekly, you must report their earnings vis PAYE.
- It’s imperative to acquire employee info to narrow down their tax code.
- Set up the employee using your payroll software.
- After that, you must register your employee with the HMRC by using an FPS or full payment submission.
Record pay and make any deductions
In order to maintain HMRC payroll compliance, you need to record payments, make deductions and also report everything. Whether you use payroll outsourcing services or rely on payroll software, you have to record the employee pay, calculate any deductions and national insurance contributions, create pay slips, and also report the pay/deductions to the HMRC. These are tasks you must complete every time you pay an employee. Depending on the industry, you will need to complete monthly or yearly tasks as well.
Conclusion
Finding the right small business payroll solutions can be very difficult and time-consuming. That’s why it’s essential to work closely with industry experts, and McCarthy Browne Ltd is here to help. Our focus is to provide customers with comprehensive, state-of-the-art bookkeeping and payroll solutions at affordable prices. We cover many locations in Dorset and Hampshire, and we are always here to assist with HMRC payroll compliance, payroll outsourcing, or any other solutions. Contact us today for a quote and more information!