KNOWLEDGE|
(1) |
Pay As You Earn (PAYE) Registration
Employers need to register with Her Majesty’s Revenue and Customs (HMRC) when they start employing staffs. Registration must be done before the first payday. It can take up to 12- 21 working days to get the employer PAYE reference number, which comprises three-digit HMRC office number and a unique reference number, usually it looks something like 123/AB45678, with some exceptions.
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(2) |
Auto Enrolment (AE) Pension
AE Pension was introduced by the Government as a way to help employees save in a tax efficient way for their retirement with the help of their employer and to reduce their reliance on the State Pension.
Employers need to choose a pension scheme as soon as they can as it can take some time to complete. They can either choose the scheme themselves or get help form an advisor.
There are a number of things an employer should check before choosing a pension scheme. This includes whether it will accept all the staff, how much it cost and whether it uses the best tax relief method for their staff, and whether it will work with their payroll.
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(3) |
Employers’ Liability (EL) Insurance
An employer must get EL Insurance as soon as becoming an employer, and the policy must cover for at least £5 million and come from an authorised insurer.
EL insurance will pay compensation if an employee is injured or becomes ill because of the work they do.
An employer could be fined £2,500 every day if they are not properly insured and could be fined £1,000 if they do not display EL certificate or refuse to make it available to inspectors when they ask.
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No. |
Categories |
Paid by |
Rate |
Annual Income Range |
|
1 |
Tax (PAYE) |
Employee |
0% |
between 0 to £12,570 |
|
20% |
between £12,571 to £50,270 |
|||
|
40% |
between £50,271 to £125,140 |
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|
45% |
above £125,140 |
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2 |
National Insurance Contribution (NIC) |
Employee |
0% |
between 0 to £12,570 |
|
8% |
between £12,571 to £50,270 |
|||
|
2% |
above £50,270 |
|||
|
Employer |
0% |
between 0 to £5,000 |
||
|
15% |
above £5,000 |
|||
|
3 |
Pension (Auto enrolment) |
Employee |
5% |
above £6,240 |
|
Employer |
3% |
above £6,240 |
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(1) |
Tax (PAYE)
Most people are allowed to receive a certain amount of income before having to pay income tax. This is known as the basic personal allowance. It may be bigger if Marriage Allowance or Blind Person’s Allowance is claimed.
In 2025-26, the basic personal allowance is £12,570. The personal allowance is the same for everyone, but it goes down by £1 for every £2 if you earn more than £100,000. This means your allowance is zero if your income is £125,140 or above.
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(2) |
National Insurance Contribution (NIC) National Insurance is collected by government to fund state benefits such as state pension, jobseeker’s allowance, maternity allowance etc. It is paid by three groups of people: (a) Employees - from their wages (b) Employers - on top of the wages they pay out (c) Self-employed - trading profits Employer NICs have a tax-free threshold per employer. The employment allowance reduces each employer’s aggregate NICs liability by up to £10,500, subject to government's adjustment. |
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(3) |
Pension (Auto enrolment)
Under the Pensions Act 2008, every employer in the UK must put certain staff into a workplace pension scheme and contribute towards it. This is called 'auto enrolment'. If you employ at least one person you are an employer and you have certain legal duties.
If your UK company currently or will employ at least one person and have at least one person aged between 22 up to state pension age, and who earns more than £192 per week (£833 per month or £10,000 per year), then your UK company will be an employer with staff who must be put into a pension scheme. Your automatic enrolment duties start when you employ your first member of staff (duties start date).
All employers must offer a workplace pension scheme by law, and enrol eligible employees into a pension scheme and make contributions to their pension.
Eligible employees are those: (a) aged between 22 and State Pension age (b) earn more than £10k a year (c) work in the UK In most AE schemes, contributions made based on employees’ total earnings between £6,240 and £50,270 a year before tax. Total earnings include: (a) salary (b) bonuses and commission (c) overtime (d) statutory sick pay (e) statutory maternity, paternity or adoption pay
Total minimum contribution is 8%, and employers minimum contribution is 3%. In case of employers contributing more than 3%, employees can pay in less than 5% as long as total minimum contribution is met.
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Monthly Salary £ |
PAYE |
NIC |
Pension |
Cost/ Take-home |
|||
|
Amount £ |
Note |
Amount £ |
Note |
Amount £ |
Note |
Amount £ |
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|
Employer |
3,000 |
- |
|
388 |
£5,000 threshold, @15% |
74 |
£6,240 threshold, @3% |
3,462 |
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Employee |
3,000 |
391 |
£12,570 tax free annual allowance, @20% |
156 |
£10,000 threshold, @8% |
99 |
£6,240 threshold, @5% |
2,354 |
|
Item |
Description |
Amount (£) |
|
|
1 |
PAYE Scheme registration |
One-off |
200 |
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2 |
Workplace Pension Registration |
One-off |
250 |
|
3 |
New employees opt in/opt out of Pension contribution or change of employee information |
Per submission |
10/ head |
|
4 |
Pension calculation and submission to Pension Scheme |
Per submission /monthly |
20 |
|
5 |
Setting up Payroll Scheme on payroll system |
One-off |
100 |
|
6 |
Periodic/Monthly Payroll calculation and submission |
Per submission /monthly |
60/head |
|
7 |
Employee Benefit in Kind (P11D) calculation and submission (except providing living accommodation and company car) |
Per submission /yearly |
60/head |
|
8 |
Living accommodation Benefit calculation and submission |
Per submission/ yearly |
200/head |
|
9 |
Company car and fuel costs Benefit calculation and submission |
Per submission /monthly |
200/head |
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10 |
Changing Pension provider and Payroll system as per client’s instruction |
One-off |
Negotiate |
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Disclaimer All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage. |
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