Payroll

• Give the employee an Employee Details Form to complete
• Ask for the Employee’s P45 from their previous employer
• Forward both Employee Details Form and P45 to RMD Accountancy Solutions for processing

A P45 form is a document which is issued to an employee on leaving their employment. The form details the employee’s taxable earnings to date where appropriate and the tax code / basis previously operated.

The employee should then give this form to their new employer / RMD Accountancy Solutions in time for their first pay to be calculated.

A new employer / RMD Accountancy Solutions will then process the P45 Form based on the information detailed and the employee’s earnings will continue to be taxed at the appropriate level.

A tax code is a code which indicates the level of tax free allowance / pay an individual is entitled to in any tax year. Once an individual’s pay exceeds their tax free allowance for the year tax is then paid / applicable at the appropriate rate for the balance of the earnings exceeding the tax free allowance.

In terms of payroll processing the tax free allowances are pro-rated to the tax week / month for which the payroll is being calculated and so an individual’s earnings may exceed the tax free allowances in any week / month with tax becoming payable accordingly.

A tax code can be either operated on a Cumulative Basis or on a Week 1 / Month 1 Basis. This has the following effects on the tax calculated within a payroll run.

Cumulative Basis
Tax codes on a Cumulative Basis enable previous earnings history and tax already paid to be taken in to account when calculating the tax on each payroll run. If an employee has overpaid tax in a previous employment or in the current employment the employee’s earnings have significantly dropped then the overpaid tax will be refunded via the payroll when it is run. Equally though, if an employee has not paid enough tax any underpaid tax would be recovered if the employee’s tax code is on a cumulative basis.

Week 1 / Month 1 Basis
If a tax code is operated on a Week 1 / Month 1 basis then the payroll will not take any other earnings history or tax paid into account and therefore refunds will not be generated via the payroll. Only the current earnings for the period being processed are used to calculate the level of tax due to be paid.

Gross pay is the total payment an employee is entitled to over a specific period. This may contain payments for hours worked, overtime, bonuses, expenses, allowances etc…

Taxable pay is the total payment an employee is entitled to over a specific period on which tax is payable.

It should be noted that all payments an employee may be taxable.

Net pay is the amount which an employee receives, often referred to as "Take Home Pay".

Net pay is the resultant pay after tax, national insurance, pension contributions and voluntary contributions have been deducted.

Employees are entitled to 5.6 weeks holiday pay at average hours (this includes bank holidays)

If an employee doesn’t work fixed or regular hours, then the holiday pay is calculated on the average of the previous 12 weeks hours worked. Further information can be found on the Gov.uk website

• Ask the employee to complete a Self Certification Form (SC2) - This form covers employees for up to 7 days of a new period of sickness
• If the employee if off for 7+ days the employee needs to submit a doctors note to enable SSP eligibility and payments to be determined

Ask for her MAT B1 form from the doctor/midwife.

A MAT B1 details when the baby is due and is actual confirmation of pregnancy.

• New parents are entitled to 2 weeks paid leave called Statutory Paternity Leave (SPP)
• Leave must be taken in whole weeks
• SPS is subject to the employee’s level of earnings / eligibility conditions

The employee can be reimbursed at a rate of 0.45p for their first 10,000 miles and then 0.25p for 10,000+ miles without incurring a tax liability (tax + NI free).

A company car is a taxable benefit and therefore the employee incurs a tax liability and the employer incurs NIC class 1A liability.

• Form P46 Car needs to be completed detailing the make, model, emissions of the vehicle together with the employee’s details NINO etc
• The form is then sent to the HMRC for processing. The HMRC will then issue a revised Tax Code for the employee concerned

The Employers Payslip Booklet is used to make payments of PAYE over to HM Revenue & Customs by cheque. HMRC are now encouraging payments to be made by bank transfer / electronically now and where this is done HMRC have stopped issuing payment booklets.

Payments paid out for the following:

• Net Pay
• PAYE
• Pensions
• Attachment of Earning Orders

These payments are all posted to the same nominal account that the liability was posted to within the accounts. Once all the payments have been made the liability accounts should either balance off to zero or carry a balance of payments still awaiting to be paid out - this may be the case if you have a weekly payroll and payroll journals are being posted more regularly.