10 Nov Here’s How HMRC is Changing Things for you in Payroll System and PAYE
PAYE returns filing after the completion of payroll used to take a lot of time a few years ago. Since 2013, HMRC has changed things and now you have to file returns online each time you pay your employees. The whole payroll system works in real-time now.
Whenever you are paying your staff, it is obvious that you have to tell the HMRC about the employees’ earnings. In the old system, you were relying on the process of sending the details to the taxman one time in a year.
But, things are not the same anymore. You will have to do it every time after completing the payroll. The process is now transformed and you have to do it electronically.
The old process and the new electronic system
If you know the HMRC payroll system, you know the panic-stricken manual system that always kept you on your toes all the time. Earlier, the process of payroll was more complex and required caution and vigilance. You had to deduct the exact amount of income tax, National Insurance (NI), and other expenses including student loans from the salaries of your employees.
This was a tiresome process for some people and a responsibility which required too much care. You would have to send the collected funds to the HMRC in a later stage. At the end of the year you must provide details of the accounts to your employees.
Thankfully, after 2013 HMRC made things simpler. Through HMRC’s Real Time Information (RTI) system all the expenses, NI, and taxes have to be sent via BACs after or before you pay your employees.
Let’s take a look at some of the ways you can manage your accounts.
Are you still completing your payroll system by hand?
A lot of employers still prefer manual systems. You can calculate your payroll free of charge by the HMRC information system. But the manual calculation can be very hectic.
You don’t want to be embroiled with the busy schedule of yours; you have to keep up with the tax changes throughout the year. If your firm is operating without electronic payroll systems, you will struggle with the RTI system. The majority of businesses have converted their systems and brought much necessary atomization.
There is no room for error
RTI has a lot of benefits, but one of the best things about the system is that it] provides up-to-date information about employment income. There is no room for error in this system. If you make a mistake it will affect your employees. Your employees will not be able to get the correct tax credits.
You might have to go with the process very carefully and be wary about the mistakes from your end. If you pay less or make a mistake in NICs, you will be responsible for the situation. Your employees won’t be affected. So, it is better to complete your payrolls with the computerized system. Manual handling will cost you very dearly.
Time is of the essence
Now you are probably thinking, what will be the implications of using a software? If you use payroll software or go along with an agency or with your accountant, you will have to be more time vigilant. Time is the single most important thing. You will be doing yourself a favor If you are including the details about new recruiters or leavers timely.
Go with the payroll software
The payroll software will give you more freedom and ease things for you. You can get it off the shelf. Don’t scratch your head just yet, its price is very reasonable. You can get it for £200 and you don’t require any training for it. Well, you can spend this much for a handy tool. The system works in a very robust way and generates a payslip for every employee. You will have the authority to generate tax codes and generate HMRC forms for the staff.
For your seamless experience, HMRC ensures the quality and motivates software-based data entries.
Look for the outsourcing options
If you are running a business, just make sure that your employees are in the clear and they know about their legitimate deductions. HMRC stresses the need for the employee’s security. To ensure more clarity and transparency, it is better that you hire an accountant for your tax affairs. This will minimize liability issues.
If you have outsourced your payroll, then look into your provider and make sure they are compliant with RTI. The service provider will ask you to provide timesheets for timely submission.
No year-end returns anymore
The RTI system will make your life easy. You don’t have to submit year-end returns anymore. If you are new to this system, it will take a little bit of time. But, there is nothing to worry about here. You will get the hang of it eventually. Just take some time to adjust and get some familiarity with the system. The prime difference you will feel is accuracy and efficiency.