Small businesses that employ staff will, with very few exceptions, need to operate a payroll to process wages and salaries. Until a couple of years ago it was possible to do this on paper. This is no longer realistic. Recent changes make a proper payroll system essential. Notably, the introduction of RTI (Real Time Information) reporting to HMRC and pension auto enrolment have greatly increased complexity.
It is possible to run payroll yourself; PC or cloud based systems are readily available and are not expensive. Before going down this route, there are other factors to consider. You would need to invest time to in setting-up the system, learning how to use it and to understanding the legal requirements which change every year. A small company may be better off outsourcing this to their accountant or a payroll specialist.
We can provide a full payroll service. We will:
- Calculate PAYE Tax, National Insurance and Student Loan deductions
- Provide pay statements
- Submit monthly and annual returns to HMRC
- Handle pension auto enrolment
- Submit P11d returns; these are often overlooked by small businesses but are not optional
Tax Benefits from Running Payroll
Very small companies with a single owner director do not need to run a payroll. The director can chose to take surplus funds from the company as dividends. This may be simpler than running a payroll but is it not tax efficient.
Paying a balance of both salary and dividends can reduce the tax liability significantly. Tax saved can cover the additional cost of running a payroll several times over. In addition, paying a salary can keep the director’s national insurance contributions up to date at little or no cost. This may not seem important at present but can make a material difference to entitlement to state pensions and other benefits.