Your payroll software will calculate how much tax and National Insurance to deduct from your employees’ pay. These deductions are worked out using each employee’s tax code and National Insurance category letter.
You may also need to deduct student loan repayments, pension contributions, Payroll Giving donations and child maintenance payments.
Student loan repayments
Use your payroll software to:
- record if your employee needs to make student loan repayments - both in your software and on payslips
- calculate and deduct how much they need to repay (9% of their income above £18,330 a year for Plan 1, or £25,000 for Plan 2)
Make pension deductions after you take off National Insurance. You normally make pension deductions before you take off tax - check with your workplace pension provider.
You’ll also need to pay any employer contributions into your employee’s pension.
A new law means all employers will have to provide and pay into a workplace pension scheme for their employees - this is called ‘automatic enrolment’.
Your employees can donate to charity directly from their pay before tax is deducted using Payroll Giving.
Register with a Payroll Giving agency to set up a scheme. They’ll let you know how to make deductions.
As well as the usual payroll records, you must also keep the agency contract, employee authorisation forms and details of payments to the agency.
You may need to deduct child maintenance directly from a paying parent’s earnings or pension.
Step 1 Check your business is ready to employ staff
Step 2 Recruit someone
You need to advertise the role and interview candidates. You can use a recruitment agency to do this or do it yourself.
As an employer you must make sure you recruit employees fairly.
and Check they have the legal right to work in the UK
and Find out if they need a DBS check
Step 3 Check if they need to be put into a workplace pension
You have ongoing responsibilities to check if your employees need to be put into a workplace pension scheme.
Step 4 Agree a contract and salary
When someone accepts a job offer they have a contract with you as their employer.
Step 5 Tell HMRC about your new employee
You must tell HMRC about your new employee on or before their first pay day.