What payroll taxes do employers and employees pay
For the 2024/25 tax year, employers pay National Insurance at 13.8% on an employee’s pay above what is called the Secondary Threshold (or ST). For the 2024/25 tax year this is £175 per week, £758 per month or £9,100 per year. National Insurance is set to increase to 15% from April 2025 and the ST is set to reduce to £96 per week, £417 per month or £5,000 per year. Employer’s also pay National Insurance on benefits in kind made available to employees at the same percentage. For the 2024/25 tax year, employees pay National Insurance at the rate of 8% on earnings above the Primary Threshold (or PT) and 2% on earnings above the Upper Earnings Limit (or UEL). For the 2024/25 tax year the PT is £242 per week, £1,048 per month or £12,570 per year). The UEL is £967 per week, £4,189 per month or £50,270 per year. Employees also pay tax on earnings above the tax-free Personal Allowance (currently the same rates as the PT for National Insurance) at 20%, rising to 40% on earnings above the rates applicable for the UEL. There is an additional tax rate of 45% on earnings over £125,140 per year.
As an employer what are your payroll obligations
There are many obligations that employer’s face, both to the employee and HM Revenue & Customs (HMRC). Some are connected, such as ensuring that the correct amount of PAYE (tax and National Insurance) is deducted from employee pay and paying this over to HMRC. Obligations to HMRC include filing the necessary EPS and FPS forms electronically for each pay period to HMRC. Workplace pensions and auto enrolment is another obligation facing employers and this is a whole additional administrative and legislative burden. In summary, an employer must make available to qualifying employees a workplace pension and contribute a minimum amount into it for each pay period.
What payroll records must be kept
As an employer you must keep records of what you pay your employees and the deductions that you make from them. It is also vital that you have concise records of employee names, National Insurance numbers, dates of birth and start and end dates. Keeping records of holidays and sickness absence will help make sure that you keep on top of the associated legislation. Employers must keep records for a minimum of 3 years from the end of the tax year that they relate to. This also includes sufficient records that prove the correct minimum wage has been paid, such as hours worked and rates of hourly pay.
How to set up payroll for small business
To set up payroll as an employer, you must register as an employer with HMRC. This is often referred to as setting up a PAYE scheme. The timescale from applying for the scheme with HMRC and receiving the PAYE reference and Accounts Office reference (needed for paying PAYE deductions to HMRC) is usually around 2 weeks.
How to calculate employer payroll contributions
The best way to do this is by using appropriate software to ensure complete compliance with all your obligations, especially as legislation and rates can change annually. HMRC do currently make available their Basic PAYE Tools software where you have fewer than 10 employees. This in our opinion is no substitute to outsourcing your payroll to an accountant as, in reality, the tool will simply process the information entered and will not help you with the day to day aspects of being an employer.
How much is ssp per day
The current weekly rate of SSP is £116.75 (rising to £118.75 in April 2025). Current legislation states that an employee must have been off sick for at least 4 days in a row, to include non-working days. To qualify, they must also have been earning on average £123 per week. SSP is calculated on the number of days off sick and so a qualifying day would pay £23.35 SSP.
What is gross salary
Gross salary is the amount of pay that an employee is entitled to before any deductions are made for things such as National Insurance, tax or student loan repayments.
What does net pay mean on payslip – net pay on a payslip is the amount that an employee is physically due to be paid, after deductions for National Insurance, tax, pension contributions and other things such as student loans repayments.
What is the minimum holiday entitlement
The minimum holiday entitlement for a full-time employee is 5.6 weeks paid holiday per year. This is the equivalent of 28 days and is typically known as annual leave or statutory leave entitlement. Employees working irregular hours or part of the year are entitled to the same 5.6 weeks statutory leave. They will accrue leave depending on the number of hours they have already worked in the leave period instead of getting a fixed number of days.
What is the minimum wage for over 25s
The minimum wage for employees over the age of 25 is currently 11.44 per hour. This is due to rise to £12.21 per hour from April 2025.
