What is HMRC?
5th to 9th September 2022 is the UK’s National Payroll Week. National Payroll Week was established to raise the profile and awareness of payroll in the UK. Organised by the Chartered Institute of Payroll Professionals (‘CIPP’), it was first established in 1998 to celebrate the payroll profession and those individuals who keep the UK paid.
National Payroll Week also helps demonstrate the impact payroll has on the UK economy.
In the tax year from April 2021 to April 2022, HMRC collected £718.2billion in taxes. In 2021 to 2022, receipts from Income Tax, Capital Gains Tax and National Insurance (combined) accounted for 56% of the annual receipts.
To celebrate National Payroll Week 2022, we’re taking a look at HMRC, one of the main government agencies that payroll providers interact with.
What is HMRC?
HMRC stands for Her Majesty's Revenue and Customs. HMRC is the UK government’s tax authority. It’s also known as Her Majesty's Revenue Services.
HMRC is responsible for collecting taxes, paying child benefits, enforcing tax and customs laws and enforcing the payment of the National Minimum Wage (‘NMW’) by employers. The taxes it collects include Income Tax, Capital Gains Tax (‘CGT’), Value Added Tax (VAT), alcohol and tobacco duties, environmental tax and air passenger duty and Corporation Tax - which is a percentage of a business’s profits - amongst others.
What is PAYE?
Businesses that have employees usually pay them on a Pay As You Earn (‘PAYE’) basis. This means they are usually paid weekly or monthly and employees’ Income Tax and National Insurance Contributions (‘NICs’) are deducted before a net payment is made to the employee. The employer is responsible for reporting the payments and deductions made. They’re also responsible for sending the money collected for tax to HMRC each month.
PAYE is a tax on all payments of wages and salary. Tax is also deducted from other forms of payment, such as compensation for sick pay, parental pay, directors’ fees and pensions.
Income Tax and NICs are deducted by the employer from payments where specific criteria is met. The criteria is if an employee is paid above the National Insurance lower earnings level (currently £242 per week), get expenses and/or benefits, have another job or get a pension.
How is Income Tax Paid?
Income tax is deducted ‘at source’ for employees. This means that Tax and National Insurance contributions are calculated and deducted from the employee’s gross pay before net paid is included in a payroll run. The employer has the responsibility of reporting the sums deducted and making the payment of those deductions to HMRC. They have to do this monthly and they do this using a process known as RTI.
What is RTI?
RTI stands for Real Time Information. RTI was introduced by the government in April 2013 and reformed PAYE reporting. It required all UK employers to notify HMRC of their PAYE liability at the time (or before) employers made salary payment to their employees.
The idea behind RTI was to improve the way employers provide information to HMRC about PAYE to HMRC and to increase the benefits to HMRC, employers and employees.
These benefits include a reduced risk for employers and employees of over or underpayment of tax as well as a simplification for the end of year as the PAYE reporting is carried out throughout the year. This means there would be no more need for an End of Year return from employers.
RTI also helps employers dealing with leavers and joiners and creates a reduced scope for error and fraud.
RTI was the most significant change ever made to PAYE.
How does RTI work?
Employers submit information electronically to HMRC. They do this by submitting what’s called a Full Payment Submission (‘FPS’). The FPS is to be sent on or before the company’s pay run and informs HMRC about the payments and deductions for each employee.
Information in the FPS includes:
- employer registration details - PAYE reference, Accounts Office reference, etc
- personal ID details for each employee - name, address, National Insurance Number, date of birth, gender, etc
- employment details for each employee - directorship, starter information, leaver information, etc
- year to date figures for each employee - Income Tax, NICs, Student Loan deductions, pension contributions, statutory pay, etc
- information for the relevant period for each employee - payment date, gross pay, indication of unpaid absence, etc
Once the FPS has been submitted, employers can run their payroll and get their staff paid.
How does PayCaptain help?
As a fully outsourced payroll provider, PayCaptain helps businesses run their payroll from end to end. The PayCaptain solution allows for the employer, or the PayCaptain team, to enter all the employee personal information, hours worked, absences, bonus and pension information, so that staff are paid effectively and on time.
Once the pay run has been approved by the employer, PayCaptain automatically transfers the FPS to HMRC before making payments into employees’ accounts, making sure your team are paid correctly, on time, first time.
With the PayCaptain mobile app, employees can take advantage of a host of innovative functionality to improve their financial well-being. PayCaptain provides employees with interactive payslips that explains Income Tax and National Insurance contributions so they always know what has been deducted and how the deductions have been calculated.
How do I contact HMRC?
There are numerous ways you can contact HMRC.
HMRC now have an official app. With the app, users can see:
- the users tax code and National Insurance number
- an estimate of the tax to be paid
- income and benefits
- tax credits and when they will be paid
- Unique Taxpayer Reference (UTR) for Self Assessment
- how much Self Assessment tax is owed
The HMRC app can also be used to:
- make a Self Assessment payment
- report tax credits changes and complete your renewal
- access the Help to Save account
- use the HMRC tax calculator to work out take-home pay after Income Tax and National Insurance deductions
- track forms and letters that have been sent to HMRC
- claim a refund for overpaid tax
- update postal addresses
The free HMRC app can be downloaded from:
Users can also contact HMRC by telephone for tax, NIC andPAYE enquiries. Opening times are Monday to Friday 8am – 6pm. Helplines are not available on weekends or bank holidays.
0300 200 3500
+ 44 191 203 7010
HMRC Online Services are also available. Here, a user can sign in for things like:
· personal tax
· business tax
· PAYE for employers
· Self assessment
A user must first register for tax online. Once registered, returns can be submitted online as well as payments made and enquiries answered.
Why is it important to be an HMRC recognised Payroll provider?
PayCaptain is payroll software that’s recognised by HMRC. This means that businesses can use it to report PAYE to HMRC online. Being recognised and approved by HMRC means that customers have confidence in thePayCaptain solution and the payroll software remains up to date with current HR and Payroll legislation. Being recognised and approved by HMRC means thatPayCaptain is a name that business can trust.
In summary, HMRC is the government’s tax authority that’s responsible for collecting taxes, National Insurance contributions and enforcing tax and customs laws. The tax collected is used to fund public services such as the NHS, education and the welfare system as well as road construction, railways and housing. National Insurance is used to pay for things including the state pension, statutory sick pay and maternity leave.
PayCaptain Payroll Solutions Limited, www.paycaptain.com is an HR/FinTech company that delivers a fully automated cloud payroll service. The solution contains many unique and innovative features for employees, helping them to take control of their pay and increase their financialwell-being. PayCaptain is a payroll solution that helps employers pay their workforce, regardless of income and personal circumstances. The solution also incorporates functionality that's specifically designed to positively impact financial resilience for people struggling with money, or vulnerable and low-income employees.
PayCaptain is the world’s first payroll company to be B-Corporation certified. To read more about B-Corporations, visit www.bcorporation.net
PayCaptain has been recognised and rewarded with two B Corp ‘Best for the World’ awards for being within the top 5% of highest scorers within both the Workers and Governance impact areas in the B Corporation B Impact Assessment.