Check you need to pay someone through PAYE
You usually have to pay your employees through PAYE if they earn £116 or more a week (£503 a month or £6,032 a year).
You do not need to pay self-employed workers through PAYE.
Working out if someone is an employee or self-employed
As a general rule, someone is:
- employed if they work for you and do not have any of the risks associated with running a business
- self-employed if they run their own business and are responsible for its success or failure
You must check each worker’s employment status to make sure they’re not self-employed. If you get it wrong you may have to pay extra tax, National Insurance, interest and a penalty.
Temporary or agency workers
You need to operate PAYE on temporary workers that you pay directly, as long as they’re classed as an employee.
You do not need to operate PAYE if a worker is paid by an agency, unless the agency’s based abroad and does not have a trading address or representative in the UK.
There are special rules for harvest workers or shoot beaters employed for less than 2 weeks.
Employees you only pay once
You operate PAYE differently for employees you only pay once.
Set up a payroll record with their full name and address. If you give them a payroll ID, make sure it’s unique.
When you send your Full Payment Submission (FPS):
- use tax code ‘0T’ on a ‘Week 1’ or ‘Month 1’ basis
- put ‘IO’ in the ‘Pay frequency’ field
- do not put a start or leaving date
Give your employee a statement showing their pay before and after deductions, and the payment date, for example a payslip or a letter. Do not give them a P45.
You do not need to operate PAYE on volunteers if they only get expenses that are not subject to tax or National Insurance - check if their expenses are affected.
Operate PAYE on students in the same way as you do for other employees.