Earlier today I met a new client who was missing out on hard earned income for his family because of some bad advice. His wife was supporting him with the running of his business, doing the odd bit of work here and there, but because he’d been told that if she earned an income from the business, he’d need to run a payroll – he wasn’t paying her for this work… Perhaps this sounds familiar?
What he didn’t realise was that he didn’t need to run a payroll as he didn’t meet the criteria outlined below… and as a result of the bad advice he’d been given, his wife has lost out on a fair chunk of pay each week and the associated tax savings for him!
As long as none of your employees (yourself included) has another job or pension and you are paying them under the Lower Earnings Limit (LEL) – for Tax Year 17/18 this is £113 per week – you do not need to set up a PAYE scheme.
So for example, you do not need to set up a PAYE scheme if you employ 3 members of staff who each earn £112 per week and none of them has any other job or pension.
However, if you meet either of the criteria below you will need to set up a scheme to comply with PAYE regulations:
- If you employ someone with a salary of over £113 per week, you will need to set up a scheme and include all employees on the payroll, even those who earn less than the LEL.
- If you take on a new employee who is engaged in employment elsewhere you will need to set up a scheme and deduct PAYE and NI contributions from all your employees (where applicable)
For further info and help with setting up a PAYE scheme (or if you just need to confirm that you don’t need one!) get in touch and we’ll be happy to advise… and if you do need a PAYE scheme, Link Accounting promises to save you time and money from the get-go by recommending and helping you set up the best payroll software for your business.