Payroll

The deadline for submitting the 2021-22 forms P11D, P11D(b) and P9D is 6 July 2022. The forms can be submitted using commercial software or via HMRC’s PAYE online service. Employees must also be provided with a copy of the information relating to them on these forms by the same date. P11D forms are used to provide information to HMRC on all Benefits in Kind (BiKs), including those under the Optional Remuneration Arrangements (OpRAs) unless the employer has registered to payroll benefits.

This is known as payrolling and removes the requirement to complete a P11D for the selected benefits. However, a P11D(b) is still required for Class 1A National Insurance payments regardless of whether the benefits are being reported via P11D or payrolled. The deadline for paying Class 1A NICs is 22 July 2022 (or 19 July if paying by cheque).

Where no benefits were provided from 6 April 2021 to 5 April 2022 and a form P11D(b) or P11D(b) reminder is received, employers can either submit a 'nil' return or notify HMRC online that no return is required. Employers should ensure that they complete their P11D accurately, including all the details of cars and loans provided. There are penalties of £100 per 50 employees for each month or part month a P11D(b) is late.  There are also penalties and interest for late payments.

Any tax or National Insurance due for 2021-22 under a PAYE Settlement Agreement (PSA) needs to be paid electronically to clear into HMRC’s bank account by 22 October 2022 (19 October 2022 for payments by cheque). This does not need to be reported on a P11D.

There are a multitude of rules that new businesses must follow when they start employing staff for the first time. These include ensuring registering for PAYE as an employer with HMRC. This must be done before the first payday and this process must even be completed by directors of a limited company who are employed by the company.

There is no requirement to register as an employer in the event that none of your employees are paid more than £123 a week, don’t receive expenses or benefits and don’t have another job or get a pension. However, even if this was the case you are still required to keep payroll records.

Setting up payroll for the first time can be daunting and we are here to help. As a general rule you have the choice between using a payroll provider or running your own payroll. If you decide to run your own payroll you must choose suitable payroll software.

HMRC also needs to be sent information about tax and other deductions from employees’ pay when the employee is paid. This is done using the Real Time Information (RTI) system which involves employers sending HMRC information each tax month. Tax months run from the 6th of one month to the 5th of the next.

You must also ensure that you are complying with the minimum wage legislation, check that any new employees have the legal right to work in the UK and to be aware that you will be required to offer a workplace pension scheme.

HMRC has published an updated version of the rates and thresholds for employers following the spring statement. The main changes relate to the increases in the National Insurance (NIC) thresholds. This will see the NIC threshold increase from £9,880 to £12,570 from 6 July 2022 and result in the alignment of the Primary Threshold (PT) for Class 1 NICs and Lower Profits Limit (LPL) for Class 4 NICs, with the personal allowance of £12,570.

The PT and LPL will be £9,880 (as previously announced) from 6 April 2022 – 5 July 2022 and £12,570 from 6 July 2022 – 5 April 2023. This means the LPL will be £11,908 for the 2022-23 tax year which is equivalent to 13 weeks of the threshold at £9,880 and 39 weeks at £12,570. HMRC’s document also includes weekly and monthly figures to help calculate weekly / monthly pay.

The increases in NICs of 1.25% – first announced last year – also took effect from April 2022. These increases will be ring-fenced to provide funding for the NHS, health and social care.

The increases will also apply to Class 1 contributions (paid by employees) above the primary and secondary thresholds. Employers should ensure that they have prepared for the increase as these changes will increase wage costs from April 2022.

All existing NICs reliefs to support employers will continue to apply. In addition to the employment allowance, this includes the following:

• employees under the age of 21
• apprentices under the age of 25
• qualifying Freeport employees
• armed forces veteran

There are also corresponding increases in Secondary Class 1 NICs (paid by employers) and Class 4 NICs (paid by the self-employed).