When it comes to administrating the PAYE system within your business, you have three main options. First, you can choose to undertake the PAYE in-house, either doing it yourself or hiring/using an existing employee. Secondly, you can choose a PAYE accountant. And, thirdly, you can choose an umbrella company.
Each choice has its own merits and pitfalls. Today, we are going to explore each in turn, giving you both the advantages and the disadvantages of each. This will help you to decide which is the best choice for you.
Doing It In-House
In the past, it was much harder to conduct PAYE in-house. Even as late as the early 00s, we were still using paper and books to work out various contributions. It was a huge pain. Nowadays, we can make use of software that makes it easier to carry out. Here, you simply enter the employees’ tax code, national insurance number and letter, and the amount that they have been paid and the software makes the calculations for you. It is a bit more complicated than this, but this is the general gist.
Choices of software:
• HMRC – BASIC PAYE tools. As the name implies, this provides all the basic things that you need to do in order to calculate PAYE contributions. It works best for small companies with few PAYE issues, such as director’s contributions.
• SAGE – a paid for package, which includes more of the complex calculations.
• Intuit/QuickBooks - a paid for package, which includes more of the complex calculations.
When choosing your PAYE software, always use one that is recommended by the HMRC (both Intuit/QuickBooks and SAGE are recommended).
Conducting your PAYE yourself is relatively straightforward, but if you have never done it before, there is a relative steep learning curve.
Here, if something goes wrong, it is likely to result in a penalty and perhaps interest on any outstanding amounts.
Using a PAYE Accountant
Here, the accountant is one of your creditors. Usually, they conduct your PAYE and payroll once a month and you pay for their services as you would any of your other creditors. We would caution you to ensure that you choose a quality, and experienced, accountant. Be sure to research the company thoroughly before deciding to accept their services.
The main advantage in using a PAYE accountant is that you are almost guaranteed that they know exactly what they are doing. It is much less likely that they will make costly mistakes, and if they do, they are likely to reduce their bill to reflect their mistake.
Another advantage in using a PAYE accountant is that they understand how to take advantage of various schemes and options, and can help you save money in places that you wouldn’t be able to do yourself without extensive knowledge of accountancy.
Using an Umbrella Company
When you use an umbrella company, they incorporate umbrella PAYE. This means that they take all the liability of PAYE and that effectively, they employ the people who work for you. They will charge you for the service, and in addition will require that you pay the relevant NI and tax contributions.
Aside from this, they usually offer the same services as an accountant. Again, we would caution you to thoroughly research your choice of umbrella PAYE.
We hope that you have learned something of value by reading this article. If you would like to learn more about umbrella companies, then please visit our website.