As an employer, it is your responsibility to correctly determine the employment status of your workers – that is, whether they’re employed by you or self-employed. This depends on the terms and conditions of your working relationship with each worker.
It’s important to ascertain the correct employment status because it affects the way tax and National Insurance Contributions (NICs) are calculated for each worker. It also determines whether or not you have to operate a PAYE scheme on their earnings. PAYE (Pay As You Earn) is tax that is deducted at source – that is, from payments made to employees. Amounts deducted are treated as advance payments of income tax due from the employee and are refundable when payments made on account exceed any tax due (as determined by self assessment).
PAYE is deducted from each employee’s pay by the employer and must be remitted promptly to HMRC. Under HMRC’s Real Time Information scheme which came into force in April 2013, employers must send details to HMRC every time they pay an employee, at the time they pay them (as opposed to the previous scheme which only required an annual P35 return)
- Cardiff: Villa House, 7 Herbert Terrace, Penarth, CF64 2AH
- Bristol: 432 Gloucester Road, Bristol, BS7 8TX
Cardiff: 02920 713 800
Bristol: 0117 924 7767
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