Day-to-day payroll
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Contents
- Day-to-day payroll
- Do it online
- Part 1 When must I prepare and maintain a form P11 Deductions Working Sheet?
- Part 2 Working out and recording PAYE on form P11
- Tax codes and how to use them
- Calculating tax
- Employer CD-ROM
- Pay Adjustment Tables, Tables A
- Taxable Pay Tables, Calculator Method
- Taxable Pay Tables, Manual Method
- When to use a code on a week 1/month 1 basis
- How to use a code on a week 1/month 1 basis
- Calculating the total pay adjustment to date
- Examples
- Filling in the 'PAYE Income Tax' section on form P11
- Unusual circumstances
- Part 3 Working out and recording NICs on form P11
- Part 4 Making payments to HM Revenue & Customs (HMRC)
- Part 5 Taking on a new employee - including someone who has worked for you before
- Part 6 What to do when an employee leaves
- Part 7 Employee's tax code changes in the tax year
- Part 8 Changes that may affect an employee's NICs
- An employee reaches age 16
- An employee legally changes their recorded gender
- A married woman or widow who is entitled to pay reduced rate NICs
- An employee joins or leaves your pension scheme
- An employee has more than one job
- An employee becomes a director of your company
- An employee goes abroad to work
- An employee reaches or is over State Pension age
- Which National Insurance Tables to use
- An employee dies
- Recalculating NICs because of a change in circumstances or an error
- Underpayments of NICs
- Part 9 Student Loan Deductions
- Help and further guidance
Day to day payroll
This Helpbook helps you to:
- decide when you must complete a form P11, Deductions Working Sheet (or equivalent record)
- work out how much tax and National Insurance contributions (NICs) you need to deduct when you make a payment of wages or salary to an employee, unless the employee is a director - for help on working out NICs for a director, see booklet CA44, National Insurance for company directors (PDF 188K)
- fill in a P11, Deductions Working Sheet
- pay over tax and NICs to HM Revenue & Customs (HMRC)
- fill in a P11, Deductions Working Sheet if you take on a new employee
- take the right action when an employee leaves
- change an employee's tax code
- identify the right rate of NICs if there is a change in an employee's circumstances
- make Student Loan deductions
If your employee:
- is sick:
- see the Employer Helpbook E14, What to do if your employee is sick, included on your Employer CD-ROM or available from the Employer Orderline
- tells you they (or their wife or partner) are pregnant:
- see the Employer Helpbook E15, Pay and time off work for parents, included on your Employer CD-ROM or available from the Employer Orderline
- tells you that they, or their spouse or partner, are adopting a child:
- see Employer Helpbook E16, Pay and time off work for adoptive parents, included on your Employer CD-ROM or available from the Employer Orderline.
If your employee asks you about Payroll Giving, see the CWG2 Employer Further Guide to PAYE and NICs (2008). This guidance is also on your Employer CD-ROM or from the Employer Orderline.
Do it online
PAYE Online for Employers is a secure, convenient and quick way to send and receive day to day information about your employees. It is more reliable and efficient than using paper, and can cut down on storage space, post and administration.
Doing it online can also bring benefits for your employees, such as reduced waiting times for the right tax code and quicker updates to pension and benefits records at the end of the tax year.
You can send and receive forms and Returns online using:
- the internet - you can choose either:
- our free, 'Online Return and Forms - PAYE' product
- third party payroll software
- Electronic Data Interchange (EDI) - more suitable for large employers
- Alternatively, an agent or payroll bureau can file online on your behalf, using our PAYE Online for Agents Service.
To help you choose payroll software, we have a Payroll Standard that software can be evaluated against. Software and services that meet this standard will display the HMRC Payroll Standard logo.
The logo helps employers identify payroll software products which have the features necessary to calculate PAYE, NICs and Statutory Payments and perform a range of other payroll functions.
You can view a list of Payroll Standard accredited products and their suppliers or you can phone our Payroll Standard Helpline.
The forms you can send online include:
- P45(1) - employee leaving work
- P45(3) - employee starting work
- P46 - employee starting work (with no P45)
- P46(Car) - car provided for the private use of an employee or director
- P14
- P35
and receive:
- P6 - notice to employer of employee tax code (or amended code) and previous pay and tax
- P9 periodic - amended code (new tax year)
- SL1 and SL2 - student loan notifications
From 6 April 2009, if you have 50 or more employees, you will have to send employee starter and leaver information (on forms P45 Part 1, P45 Part 3 and P46) and similar pension information, online. All employers must send this information online from 6 April 2011. Please see more information about sending in-year information online.
When you register to use PAYE Online for Employers we will automatically send your PAYE notices and reminders online for example, P6s and P9s. These are made available from your PAYE Online service page unless you have opted to receive notices by another channel, such as paper or Electronic Data Interchange.
To access your PAYE notices and reminders select ‘PAYE for Employers’ from the ‘do it online’ menu from the HMRC homepage and login to your service using your User ID and Password.
Select one of the following options from the ‘Notice summary’ section on your PAYE Online service page:
- tax code notices (P6s and P9s)
- student loan notices (repayment start and stop notices)
- employer notices (includes tax-free incentive payment notifications and reminders such as P35N)
If you would like us to send you an email to tell you when there are online notices and reminders for you to view, you must provide us with an email address. To do this select ‘provide us with an email address’ under ‘Notice Options’ from your PAYE Online service page:
- select ‘PAYE for employers’ from the ‘do it online’ menu
- enter your password and User ID
- select ‘provide us with an email address’
As a registered user of PAYE Online you can also view and change details about your business. Once you have logged onto the service, using User ID and Password, select the link ‘About your organisation’ from your PAYE Online service page.
For more information about online filing and the online services we provide for employers:
- refer to your CD-ROM - it has a learning package giving step-by-step guidance on all aspects of PAYE Online
- contact our Online Services Helpdesk
Part 1 - When must I prepare and maintain a form P11 Deductions Working Sheet?
You must prepare and maintain a form P11 Deductions Working Sheet (or equivalent record) when:
- you pay your employee £90, or more in any week (National Insurance contributions weekly Lower Earnings Limit) £390, or more in any month (National Insurance contributions monthly Lower Earnings Limit)
If your pay period is other than weekly or monthly please see the CWG2 Employer Further Guide to PAYE and NICs.
- HMRC have issued you with a tax code for your employee
- you are required to operate a tax code taken from your employee’s P45
- you have paid your employee and you are required to operate tax code BR in accordance with the P46 procedures
If you are not required to maintain a form P11 Deductions Working Sheet, you must keep a record of the employee’s name, address and the amount of wages paid each pay period, for example weekly/monthly/four weekly.
Part 2 - Working out and recording PAYE on form P11
Tax codes and how to use them
An employee’s tax code reflects the tax allowances due against that employee’s pay.
You work out the PAYE due by using the employee’s tax code and the Tax Tables to find out how much to deduct from, or refund to, that employee on each pay day.
Codes issued by HMRC
The code your HMRC office issues to you for an employee may be any one of the following:
- A code of one or more numbers followed by the letter L, P, T, V or
Y, for example, 345L, 456V, 567P, 0T
- this is known as a suffix code
The letter shows how the code should be adjusted to take account of any Budget changes.
- this is known as a suffix code
- A code starting with either the letter:
- D followed by a number, for example, D0; this is known as a D code and means that the whole of the employee’s pay and so on should be taxed at the higher rate
- K followed by one to four numbers, for example K123; this is known as a K code and enables additional tax, for benefits and so on, to be deducted
- A code which is letters only, BR or NT
- BR means that tax will be deducted at the basic rate with no tax-free allowances
- NT means that no tax is to be deducted
Do not refund any tax deducted from an employee before the issue of an NT code, unless your HMRC office tells you to.
Never alter an employee’s tax code unless your HMRC office tells you to do so on a coding Notice or on a form P9X or a form P7X.
Calculating tax
You can use:
- payroll software
- the P11 Calculator on your Employer CD-ROM
- the PAYE Tax Calculator on your Employer CD-ROM with the paper P11 Deductions Working Sheet
- the manual Tax tables with the paper P11 Deductions Working Sheet
to calculate the amount of tax due on your employee’s earnings.
Employer CD-ROM
If you are not using Payroll Software the easiest and quickest way to calculate tax is to use the P11 Calculator on your Employer CD-ROM.
P11 Calculator
The P11 Calculator will work out how much tax to deduct from your employee’s pay and record it on the form P11 on your Employer CD-ROM. If your employee leaves during the year, you can view an ‘in year leaver summary’ to help you to complete their form P45. At the end of the tax year the ‘end of year summary’ will help you to complete your employee’s form P14.
The Learning Zone on your Employer CD-ROM gives step by step instructions on how to use the P11 Calculator. See the lesson ‘CD-ROM Database & Payroll Tools’.
Note: You must install your Employer CD-ROM to use the P11 Calculator.
PAYE Tax Calculator
The PAYE Tax Calculator calculates the ‘pay adjustment’ and the ‘tax due’ in the same way as the Pay Adjustment Tables, Tables A and the PAYE Tax Tables, and tells you which entries to make on your employee’s form P11 Deductions Working Sheet. It saves you having to use the paper tables and doing the calculations yourself.
Pay Adjustment Tables - Tables A
Use these tables in all cases where an employee has a suffix code or K code. With them you will be able to work out the employee’s ‘Total pay adjustment to date’ on any pay day.
The ‘Total pay adjustment to date’ figure represents:
- in suffix code cases, the total pay an employee may have free of tax – known as Free Pay
- in K code cases, the total pay to be added to an employee’s pay – known as Additional Pay
To use the tables you need to know the:
- employee’s tax code
- tax week/month number covering the date of payment – see the charts for weekly and monthly periods (PDF 39K)
Taxable Pay Tables - calculator method
Use these tables (Calculator Tables) together with your calculator to work out the employee’s ‘Total tax due to date’ on any pay day.
For suffix code and K code cases, you need to:
- know the employee’s ‘Total taxable pay to date’ figure.
The employee’s ‘Total taxable pay to date’ figure is in:
- suffix code cases, the total pay to date minus the Free Pay according to Pay Adjustment Tables, Tables A
- K code cases, the total pay to date plus the Additional Pay according to Pay Adjustment Tables, Tables A
Use the tables in the booklet to work out the PAYE tax deductions.
For:
- code BR cases, multiply the whole pay (rounded down to the nearest whole pound) by the rate for code BR, shown on page 2 of the tables, to calculate the PAYE tax deductions at the Basic Rate – code BR means there are no tax-free allowances
- D code cases, multiply the whole pay (rounded down to the nearest whole pound) by the rate for the D code, shown on page 2 of the tables to calculate the PAYE tax deductions at the Higher Rate on a week 1 or month 1 basis
Taxable Pay Tables, manual method
These are alternative tables (Manual Tables) you can use to work out the employee’s tax due if you prefer not to use a calculator.
When to use a code on a week 1/month 1 basis
You normally work out PAYE on a cumulative basis.
This means you need to take into account an employee’s previous pay and tax figures in the tax year to find out the tax to deduct from their pay.
Occasionally, you may have to make deductions in a non-cumulative way. This is called a week 1 or month 1 basis.
You should use a code on a week 1/month 1 basis when:
- your HMRC office
- tells you to use a D code
- adds a week 1/month 1 marking to any other code they tell you to use
- you have a new employee and there is a week 1/month 1 tax code on their P45
- you have a new employee and the instructions in the section 'your details' tell you to use the emergency code on a week 1/month 1 basis
- a weekly pay day falls on 5 April or, in a leap year, on 4 or 5 April. If this occurs, see the CWG2 Employer Further Guide to PAYE and NICs, under ‘Week 53 payments’
How to use a code on a week 1/month 1 basis
If you use the P11 Calculator on your Employer CD-ROM this will calculate the tax due on a week 1/month 1 basis for you once you have ticked the ‘week 1/month 1’ box in the Employer Database.
If you are using the Pay Adjustment Tables, Tables A, for an employee on a week 1/month 1 code, paid weekly or monthly:
- treat each payment you make to the employee separately, you should ignore their previous pay and tax details
- regardless of when the pay date is, turn to the page in the tables for week 1 or month 1 to work out the employee’s ‘Pay adjustment to date’ figure
- use the guidance, appropriate to the code, to make the entries on form P11 or equivalent record
Calculating the total pay adjustment to date
The ‘total pay adjustment to date’ figure represents:
- in suffix code cases, the Free Pay you deduct from an employee’s total gross pay to date
- in K code cases, the Additional Pay you add to an employee’s total gross pay to date.
The charts for weekly and monthly periods (PDF 39K) show the periods covered by each tax week or month.
When you have found which week or month number is appropriate for the pay date, turn to the page in the Pay Adjustment Tables, Tables A, for that particular week or month number.
If a pay date is 1 December, for example, the table shows the week number is 35, the month number is 8.
All the examples which follow use Week 35 to illustrate the procedures.
Examples
Employee’s code is 500 or less
If the employee’s code is 500 or less, look up the employee’s code in the Pay Adjustment Tables, Tables A, column headed ‘Code’.
The ‘Total pay adjustment to date’ figure is immediately to the right.
Employee’s code is 501 or more and does not divide exactly by 500
- Split the code into units of 500 and the leftover balance.
- Look up the leftover balance figure in the Pay Adjustment Tables, Tables A, column headed ‘Code’.
The ‘Total pay adjustment to date’ for the leftover balance is immediately to the right.
- Multiply the number of units of 500 by the figure given in the box marked * at the foot of the tax table page.
- Add the amounts at steps 2 and 3 above together to find out the ‘Total pay adjustment to date’ figure.
Employee’s code is 501 or more and divides exactly by 500
- Split the code into units of 500 and treat the last one as the leftover balance.
- Look up the leftover balance figure in the Pay Adjustment Tables, Tables A, column headed ‘Code’.
The ‘Total pay adjustment to date’ for the leftover balance figure is immediately to the right.
- Multiply the number of other units of 500 by the figure given in the box marked * at the foot of the tax table page.
- Add the amounts at steps 2 and 3 above together to find out the ‘Total pay adjustment to date’ figure.
Filling in the ‘PAYE Income Tax’ section on Form P11
This section explains how to complete columns 2 to 8, the PAYE Income Tax section of the Form P11.
Column 2 is used to record the employee’s gross pay for tax purposes.
Gross pay for tax purposes includes such things as overtime, bonus, commission, Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP) and Statutory Adoption Pay (SAP) minus any authorised deductions under the ‘net pay arrangements’ for superannuation contributions, or payroll giving schemes.
For further details see the CWG2, Employer Further Guide to PAYE and NICs, under ‘gross pay’.
What you record in columns 3–8 depends on the type of the employee’s code and whether or not it is being used on a cumulative basis or on a week 1/month 1 basis.
The entries to be made for each type of code are described below.
Column 3 |
Leave blank. |
|---|---|
Column 4a |
Enter the ‘Total pay adjustment to date’ figure from week 1 or month 1 of the Pay Adjustment Tables, Tables A. This is the figure you enter for ‘Total free pay to date’. |
Column 5 |
Take away the amount recorded in column 4a from the amount in column 2 to give the ‘Total taxable pay to date’. Leave blank if the figure in column 4a is more than the figure in column 2. |
Column 6 |
Leave blank. |
Column 7 |
Use the Calculator Tables, or look up in the Manual Tables, the amount shown in column 5 to find the amount of tax to deduct. If there is no figure in column 5, no tax is due. |
Column 3 |
Leave blank. |
|---|---|
Column 4a |
Leave blank. |
Column 5 |
Leave blank. |
Column 6 |
Leave blank. |
Column 7 |
Use the Calculator Tables or look up in Table D of the Manual Tables the amount shown in column 2 to find the amount of tax to deduct. |
Column 3 |
Add the amount you recorded in column 2 to the last previous amount in column 3 to give the ‘Total pay to date’. |
|---|---|
Column 4a |
Leave blank. |
Column 5 |
Leave blank. |
Column 6 |
Use the Calculator Tables or look up in the Manual Tables the amount shown in column 3 to find the ‘Total tax due to date’. |
Column 7 |
Take the previous amount in column 6 and the amount you now enter in column 6. Take the lower amount away from the higher amount to give the ‘tax deducted or refunded in the week or month’. If the amount you now enter in column 6 is the higher amount, the difference is the tax to deduct from the employee. If the previous amount is the higher amount, the difference is the tax to refund and include in the payment you make to the employee. Mark any refund entry ‘R’. |
Column 3 |
Leave blank. |
|---|---|
Column 4a |
Leave blank. |
Column 5 |
Leave blank. |
Column 6 |
Leave blank. |
Column 7 |
Use the Calculator Tables, or look up in the Manual Tables the amount shown in column 2 to find the amount of tax to deduct. |
Column 3 |
Leave blank. |
|---|---|
Column 4a |
Leave blank. |
Column 5 |
Leave blank. |
Column 6 |
Leave blank. |
Column 7 |
Leave blank. The exception is where your HMRC office has told you to refund any tax deducted. Enter the amount of any tax refunded and mark the entry ‘R’ |
Column 3 |
Add the amount you recorded in column 2 to the last previous amount in column 3 to give the ‘Total pay to date’. |
|---|---|
Column 4a |
Leave blank. |
Column 4b |
Enter the ‘Total pay adjustment to date’ figure from the Pay Adjustment Tables, Tables A. This is the figure you enter for ‘Total additional pay to date’. |
Column 5 |
Add the amount recorded in column 4b to the amount in column 3 to give the ‘Total taxable pay to date’. |
Column 6 |
Use the Calculator Tables, or look up the Manual Tables, to find out the ‘Total tax due to date’. |
Column 6a |
For the first pay day after 5 April copy the amount in column 6. For other pay days: • take the figure in column 6 and compare it with the amount in column 6 for the previous pay day • take the lower amount away from the higher amount, and – if the amount in column 6 for the previous pay day is the lower amount, add to the result any entry in column 8 for the previous pay day. Enter the figure obtained as the ‘Tax due at end of current period’. – if the amount in column 6 for the previous pay day is the higher amount, take away from the result any entry in column 8 for the previous pay day. Enter the figure obtained in column 6a. The amount you have just entered in column 6a is the tax to refund for this week/month and should be marked ‘R’. The exception to this is where the amount in column 8 for the previous pay day is greater than the difference between the higher and lower amounts in column 6, when a tax deduction is then appropriate. |
Column 6b |
Enter 50% of the ‘Pay in the week or month’. This is the ‘Regulatory limit’. |
Column 7 |
The amount of ‘Tax deducted’ you enter in this column is the lower of the figures you have entered in columns 6a and 6b, unless the figure you have just entered in column 6a shows that a tax refund is due. If a refund is due, copy the amount from column 6a and mark it ‘R’. |
Column 8 |
If the amounts in columns 6b and 7 are the same, take away the amount in column 6b from the amount in column 6a to give the ‘Tax not deducted owing to the Regulatory Limit’. Leave blank if they are not the same. |
Column 3 |
Leave blank. |
|---|---|
Column 4a |
Leave blank. |
Column 4b |
Enter the ‘Total pay adjustment to date’ figure from week 1 or month 1 of the Pay Adjustment Tables, Tables A. This is the figure you enter for ‘Total additional pay to date’. |
Column 5 |
Add the amount recorded in column 4b to the amount in column 2 to give the ‘Total taxable pay to date’. |
Column 6 |
Leave blank. |
Column 6a |
Use the Calculator Tables or look up in the Manual Tables the amount in column 5 to find the ‘Tax due at end of current period’. |
Column 6b |
Enter 50% of the ‘Pay in the week or month’. This is the ‘Regulatory Limit’. |
Column 7 |
Copy the lower of the figures you have just entered in columns 6a or 6b. |
Column 8 |
Leave blank. |
Unusual circumstances
The CWG2 Employer Further Guide to PAYE and NICs, under ‘pay intervals’, gives information about what you should do if:
- there is more than one pay day in any tax week or month
- regular pay days are at other than weekly or monthly intervals
- an employee changes from being weekly to monthly paid or monthly to weekly paid
- you change your employee’s pay day but keep the same pay interval
- you make payments in addition to normal pay on a day that is not the regular pay day
Ask your HMRC office for information about what you should do in any other unusual circumstances.
Part 3 - Working out and recording NICs on Form P11
How Class 1 NICs are made up
Class 1 NICs are made up of two elements:
- Employee’s contribution (also known as the primary contribution) which you are liable to pay in the first instance but which can be deducted from your employee’s pay
- Employer’s contribution (also known as the secondary contribution) which you are liable to pay.
Employee’s contribution
An employee’s contribution is payable if the employee:
- is aged 16 or over and under State Pension age (60 for women, 65 for men), and
- earns more than the Earnings Threshold (ET).
An employee’s contribution is payable on all earnings above the ET.
For exceptions to this rule see Part 8 ‘Changes that may affect an employee’s NICs’ in this Helpbook and the CWG2, Employer Further Guide to PAYE and NICs, under ‘State Pension age’.
Employer’s contribution
An employer’s contribution is payable if the employee:
- is aged 16 or over and
- earns more than the ET
An employer’s contribution is payable on all earnings above the ET, even if the employee is over State Pension age or otherwise excepted from paying their employee’s contribution.
How to work out NICs
To work out NICs you must first decide:
- the correct earnings period
- the amount of gross pay due to the employee within that earnings period
- the contribution Table letter
Earnings period
You must work out NICs on a payment by payment basis.
NICs are worked out on the employee’s gross pay above the ET using the appropriate percentage rates, and are based on the period of time for which the earnings are paid.
If you pay an employee weekly, the earnings period is one week.
If you pay an employee monthly, the earnings period is one month.
For more information about earnings periods, see the CWG2, Employer Further Guide to PAYE and NICs, under ‘pay intervals’.
Gross pay
Gross pay for NIC purposes is known as earnings.
Gross pay is the amount due to the employee before any deductions.
Gross pay includes such things as:
- salaries
- wages
- overtime
- bonus payments, commission and so on
For further details of what should be included as gross pay, see the CWG2, Employer Further Guide to PAYE and NICs, Chapter 5.
Contribution category letter
NICs are divided into classes and there are differing rates for Class 1 NICs, identified by category letters. It is important to know which rate or rates apply to each employee.
Each category is allocated a contribution category letter.
This letter corresponds with the letters shown in the National Insurance Tables and is referred to as a contribution Table letter.
To identify which contribution Table letter to use, see the National Insurance Tables flowchart (PDF 43K).
Methods of working out NICs
There are two methods of working out NICs. You can use either the National Insurance tables or the exact percentage method.
The same earnings limits and rates are used in both methods. You will find these either in the Employer Helpbook E12 - PAYE and NICs rates and limits 2008-09 or the National Insurance Tables.
To help you to calculate the amount of NICs due on your employee’s earnings you can use:
- payroll software
- the P11 Calculator on your Employer CD-ROM
- the National Insurance contribution Calculators on your Employer CD-ROM
- the manual National Insurance contribution Tables
The P11 Calculator and the NICs Calculators both use the exact percentage method to calculate the NICs due.
Directors’ NICs
There are special rules for calculating NICs for directors.
There is a calculator on your Employer CD-ROM which will calculate directors’ NICs for you. Go to the ‘Calculators Section’, select ‘National Insurance contribution Calculators’, then ‘Directors’ Annual Earnings Period 2008-2009.
If you need to calculate NICs for directors you should refer to booklet CA44 National Insurance for Company Directors (PDF 277K).
Calculating NICs
If you are not using payroll software, the easiest and quickest way to calculate NICs is to use the P11 Calculator on your Employer CD-ROM.
Using the Employer CD-ROM
P11 Calculator
The P11 Calculator will work out the amount of NICs to deduct from your employee’s pay and record it on the P11 on your Employer CD-ROM.
Note: You must install your Employer CD-ROM to use the P11 Calculator.
National Insurance contributions Calculators
The National Insurance contributions Calculator calculates the amount of NICs to deduct from your employee’s pay and tells you which entries to make on your employee’s form P11 Deductions Working Sheet.
Using the National Insurance contributions Tables
You must use the correct National Insurance Tables to work out the NICs due on your employee’s earnings. The NICs are worked out using whole pounds only.
In the National Insurance Tables earnings are based on steps of £1 (weekly) and £4 (monthly) between the Lower Earnings Limit (LEL) and Upper Earnings Limit (UEL). With the exception of the LEL, Earnings Threshold (ET) and UEL, NICs are worked out on the mid-point of each step. For example, in the weekly table, NICs for earnings between £109 and £109.99 are worked out on £109.50.
If you use the National Insurance Tables to work out NICs, you and your employee may pay slightly more or less than if you used the exact percentage method.
Each set of National Insurance Tables gives help on how to use them.
Filling in the form P11 using the National Insurance Tables
If you use the National Insurance Tables to work out the NICs payable you can use the same table to help you fill in the form P11.
Copy the figures in columns 1a to 1e of the table to the columns 1a to 1e of the form P11 on the line next to the tax week or month in which the employee is paid.
Exact percentage method
If you decide to use this method the NICs must be worked out using the employee’s gross pay – pounds and pence.
Each element of the employee’s and employer’s contributions must be worked out separately.
To work out the employee’s contribution
Work out the employee’s gross pay due and the earnings period.
Employee’s NICs are only payable when the employee’s earnings exceed the weekly, monthly or equivalent ET, see the Employer Helpbook E12 PAYE and NICs rates and limits for 2008-09. NICs are due on earnings between the ET and UEL at the appropriate main employee’s percentage rate. If the employee’s earnings exceed the UEL, NICs are also due at the additional employee’s percentage rate on all earnings above the UEL.
Earnings are above the ET but do not exceed the UEL:
- Deduct the weekly or monthly ET from the earnings and multiply the result by the appropriate main employee’s percentage rate to work out the NICs due.
Round the calculation to the nearest penny, disregarding £0.005 or less.
Earnings exceed the UEL:
- Deduct the weekly or monthly ET from the weekly or monthly UEL, and multiply this amount by the appropriate main employee’s percentage rate.
- Deduct the weekly or monthly UEL from the total earnings and multiply this amount by 1 per cent (the additional employee’s percentage rate).
- Add both amounts together to work out the employee’s NICs due.
Round the calculation to the nearest penny, disregarding £0.005 or less.
For details of the employee’s percentage rates, see the Employer Helpbook E12, PAYE and NICs rates and limits for 2008-09, also available on your Employer CD-ROM or the Employer Orderline.
To work out the employer’s contribution
Use the same gross pay due and earnings period to work out the employer’s contribution.
The appropriate employer’s percentage rate is used to work out the NICs due on all earnings above the ET, including those above the UEL.
If the employee is a member of your contracted-out occupational pension scheme, NICs are worked out using
- the appropriate employer’s contracted-out percentage rate on earnings above the ET, up to and including the UEL
- the employer’s not contracted-out percentage rate on the earnings above the UEL
The two amounts are added together before recording the NICs due on the form P11.
Examples of working out NICs using the exact percentage method
The following three examples each show how to work out NICs and fill in the form P11 when you use the exact percentage method and the employee is not contracted-out.
You will find details of the rates and limits in the Employer Helpbook E12, PAYE and NICs rates and limits 2008-09.
Example 1
An employee is weekly paid. NICs are due under contribution Table letter A.
The employee is paid
£237.77 on 18 July 2008.
£237.77 minus £105 (ET) = £132.77
Employee’s contribution
£132.77 x 11% = £14.604 rounded to £14.60
This is the figure to enter in column 1e on form P11.
Employer’s contribution
£132.77 x 12.8% = £16.994 rounded to £16.99
The total of employee’s and employer’s contributions payable is £14.60 + £16.99 = £31.59
This is the figure to enter in column 1d of the form P11.
The earnings columns 1a, 1b and 1c of the form P11 are filled in as follows
1a LEL £90
1b ET minus LEL £105 – £90 = £15
1c Employee’s earnings minus ET
£237.77 – £105 = £132.77
Example 2
An employee is monthly paid. NICs are payable under contribution Table letter A. £3,393.88 is paid on 31 July 2008.
Employee’s contribution
The employee is liable for NICs on all earnings above the ET, including any earnings above the UEL.
£3,337 (UEL) minus £453 (ET) = £2,884
£2,884 x 11% = £317.24
£3,393.88 minus £3,337 (UEL) = £56.88
£56.88 x 1% = £0.568
£317.24 + £0.568 = £317.808 rounded to £317.81
This is the figure to enter in column 1e on form P11.
Employer’s contribution
£3,393.88 minus £453 (ET) = £2,940.88
£2,940.88 x 12.8% = £376.432 rounded to £376.43
The total of employee’s and employer’s contributions payable is £317.81 + £376.43 = £694.24
This is the figure to enter in column 1d on form P11.
The earnings columns 1a, 1b and 1c of the form P11 are filled in as follows:
1a LEL £390
1b ET minus LEL £453 – £390 = £63
1c UEL minus ET £3,337 – £453 = £2,884.
Example 3
An employee is paid every four weeks. NICs are due under contribution Table letter A. The employee is paid £940.08 on 19 July 2008.
The first step is to work out the ET for a four weekly earnings period. To do this, divide the annual earnings threshold by 52, then multiply the answer by four.
Finally, round up the answer to the next whole pound.
Earnings Threshold
£5,435 ÷ 52 = £104.5192307 x 4 = £419
LEL and UEL
You then work out the LEL and UEL for the four weekly earnings period by multiplying the weekly limits by the number of weeks in the earnings period, in this example 4.
- LEL = £90 x 4 = £360
- UEL = £770 x 4 = £3,080
As the earnings fall between the ET and UEL, NICs are worked out as follows:
Employee’s contributions
£940.08 – £419 = £521.08
£521.08 x 11% = £57.318 rounded to £57.32
£57.32 is the figure to be entered in column 1e on form P11.
Employer’s contributions
£940.08 – £419 = £521.08 x 12.8% = £66.698 rounded to £66.70
The total of employee’s and employer’s contributions payable is £57.32 + £66.70 = £124.02
This is the figure to enter in column 1d on form P11.
The earnings columns 1a, 1b and 1c of the form P11 are filled in as follows:
1a LEL £360
1b ET minus LEL £419 - £360 = £59
1c Employee’s earnings minus ET £940.08 - £419 = £521.08.
Contracted-out occupational pension schemes
If the employee is a member of your contracted-out occupational pension scheme you will also have to work out employee’s and employer’s NIC rebates. If you use the appropriate National Insurance Tables for contracted-out pension schemes or use the calculators on your Employer CD-ROM, the NIC rebates are worked out for you and are taken into account in arriving at the amount of NICs shown as due.
Employee’s NIC rebate
The employee’s NIC rebate is calculated on earnings between the LEL and the ET. The employee is entitled to that portion of his rebate that can be offset against his NICs. The employer is entitled to any balance of the employee’s NIC rebate that cannot be offset against the employee’s NICs.
Employer’s NIC rebate
The employer’s NIC rebate is also calculated on earnings between the LEL and the ET. The employer is entitled to his own rebate plus any balance of employee’s NIC rebate not offset.
Example
Employee earns £106 per week (contribution Table letter D)
Employee’s NICs = £1 x 9.4% = £0.09
Employer’s NICs = £1 x 9.1% = £0.09
Employee’s NICs rebate = £105 - £90 = £15 x 1.6% = £0.24
Employer’s NICs rebate = £105 - £90 = £15 x 3.7% = £0.55
The employee is entitled to £0.09 of their NIC rebate, which reduces their NIC liability to nil. £0.00 is the figure to be entered in column 1e on form P11.
The employer is entitled to the balance of £0.15, plus their own NIC rebate of £0.55 = £0.70.
£0.70 employer rebate offset against £0.09 employer NICs = minus £0.61 employer NICs. R0.61 is the figure to be entered in column 1d on form P11.
(Negative figures should be denoted by an ‘R’ immediately before the entry in column 1d of the form P11.)
Further information can be found in:
- CA39 and CA43 National Insurance Tables
- CWG2 Employer Further Guide to PAYE and NICs under ‘occupational pension schemes’
Filling in a form P11 – NICs
NICs
If, during any earnings period in the year, the employee earns below the LEL, do not enter these earnings in columns 1a to 1c of the P11.
When an employee’s earnings are at or above the LEL at any time during the year, you must fill in the National Insurance section of the form P11 or equivalent record, even if the employee does not pay any NICs. You must report this information at the year end. This is to protect the employee’s entitlement to benefits, which is linked to earnings at or above the LEL.
Enter all the details of earnings at or above the LEL, and NICs in the appropriate columns 1a to 1e that corresponds to the week or month number in which you make a payment to an employee.
Where an employee’s earnings exceed the UEL, only record in column 1c of the P11 the earnings from the ET up to and including the UEL. You should not include the amount of earnings in excess of the UEL, even though the NICs payable on these earnings will be included in the total NICs figure recorded in column 1d.
Earnings details
Column 1a - Earnings at the LEL
If the employee earns at or above the Lower Earnings Limit (LEL), enter the LEL figure.
If the earnings do not exceed the LEL there will be no NICs payable and columns 1b to 1e will be left blank.
Column 1b - Earnings above the LEL, up to and including the Earnings Threshold
Enter any earnings above the LEL, up to and including the Earnings Threshold (ET). If the earnings are constantly above the ET, the figure entered here will be the same each earnings period.
If National Insurance Tables are used, the amount entered will be in whole pounds only. If the exact percentage method is used, the amount entered will be in pounds and pence, unless earnings reach or exceed the ET in which case the entry will be in whole pounds only.
If the earnings do not exceed the ET there will be no NICs payable and columns 1c to 1e will be left blank.
Column 1c - Earnings above the Earnings Threshold, up to and including the UEL
Enter any earnings above the ET, up to and including the Upper Earnings Limit (UEL).
If the earnings are constantly above the UEL, the figure entered here will be the same in each earnings period.
Do not include those earnings above the UEL.
If National Insurance Tables are used, the amount entered will be in whole pounds only. If the exact percentage method is used, the amount entered will be in pounds and pence, unless earnings reach or exceed the UEL in which case the entry will be in whole pounds only.
Contribution details
Column 1d - Total of employee’s and employer’s contributions payable
Enter the combined total of both the employee’s and employer’s NICs, not just the employer’s NICs. Where NICs are due under contribution Table letter D, F, L or S, the amount to be entered is the combined total after deduction of any employee’s and employer’s NIC rebates.
Column 1e - Employee’s contribution payable on earnings in 1c
This column should show only the employee’s NICs payable included in column 1d. Include any employee’s NICs payable on earnings above the UEL, where appropriate.
If there are no employee’s NICs payable, leave blank.
If contribution Table letter D, F, L or S is used, the amount entered should be the employee’s NICs payable after deducting the employee’s NIC rebate. If this amount is zero enter ‘0.00’.
Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP), Statutory Adoption Pay (SAP) and Student Loan deductions
The Employer CD-ROM has learning programs that will take you step-by-step through the process of deciding when to pay SSP, SMP, SPP, SAP and when to make Student Loan deductions.
You will also find calculators to help speed up your calculations of the above and save you the job of calculating the figures yourself.
Column 1f - Statutory Sick Pay
Recording SSP is optional if you are not recovering any SSP in the same tax month. You need only enter SSP paid in those tax months where a recovery is made. For more information see the Employer Helpbook E14 What to do if your employee is sick.
Column 1g - Statutory Maternity Pay
Enter the gross amount of SMP paid before deducting NICs, tax or any other deductions due.
For more information see the Employer Helpbook E15 Pay and time off work for parents.
Column 1h - Statutory Paternity Pay
Enter the gross amount of SPP paid before deducting tax, NICs or any other deductions due.
For more information if your employee is entitled to SPP because a baby was born see the Helpbook E15 Pay and time off work for parents.
For more information if your employee is entitled to SPP because a child was being adopted see the Helpbook E16 Pay and time off work for adoptive parents.
Column 1i - Statutory Adoption Pay
Enter the gross amount of SAP paid before deducting tax, NICs or any other deductions due.
For more information see the Helpbook E16 Pay and time off work for adoptive parents.
Column 1j - Student Loan deductions
You should only use this column to make Student Loan deductions from an employee’s earnings if you have been notified in one of the following ways:
- you have been notified directly by us
- your new employee gives you a P45 which has an entry in box 5
- you have submitted a form P46 with an entry in box D
The figure to be entered is the amount of Student Loan deductions worked out using the:
- Collection of Student Loans calculator on your Employer CD-ROM
- SL3 Student Loan deductions Tables.
Amounts must be rounded down to whole pounds.
Follow this link to find out what you need to do when you receive a Start notification.
Part 4 - Making payments to HMRC
When to make payment
Each tax month you must pay your Accounts Office all the amounts due for that tax month for:
- Income Tax:
- Pay As You Earn (PAYE)
- deductions from subcontractors
- Student Loan deductions
- National Insurance contributions (NICs).
The day your payment needs to reach us depends on what payment method you use.
- If you pay electronically or through your bank or Post Office, your cleared payment for the full amount due must reach our account no later than 22nd of the month. Where the 22nd falls on a weekend or is a bank holiday, your cleared payment must reach us on the previous bank working day.
- Employers who are not subject to the mandatory electronic payment rules and who continue to pay by post must ensure that payment reaches us no later than 19th of the month.
When paying electronically you need to allow enough time for your payment to reach us. Except for CHAPS which is a same day payment transfer facility, it normally takes three bank working days for payment to reach us. Some banks and building societies take longer. You will need to check how long your bank or building society takes and what their cut-off time is for initiating payment. Billpay payment reaches us on the third bank working day after your transaction.
Interest and surcharge
We charge interest on:
- any payment made electronically or through your bank or Post Office that clears our bank account after 22 April following the end of the tax year
- for employers not subject to the mandatory electronic payment rules any cheque payment that reaches us after 19 April following the end of the tax year
Large employers who are subject to the mandatory electronic payment rules are liable to surcharge if any portion of their monthly PAYE/NIC payment is late.
Payslip booklet
You need a payslip booklet to pay through your bank, a Post Office or if you post us a cheque. You do not need a payslip booklet if you pay us electronically.
To stop us issuing booklets for future years:
- follow the guidance on our How to Pay pages
- contact your Accounts Office
If you do not pay electronically and do not receive your P30BC Payslip Booklet in time to make your payments, contact your Accounts Office immediately.
Quarterly payment option for small employers
If your average monthly payments of PAYE, deductions from subcontractors, Student Loan deductions and/or NICs for the current year are likely to be less than £1,500, you can choose to pay your Accounts Office quarterly rather than monthly.
The tax quarters end on:
- 5 July
- 5 October
- 5 January
- 5 April
which means your cleared electronic payments are due by 22nd of the month in which the quarter ends or, if you pay by cheque, by the earlier date of the 19th of that month.
How the payments are calculated
In most cases the payments will be calculated for each month/quarter by:
PAYE
- adding together all the:
- tax that you have deducted from your employees
- deductions from payments made to subcontractors
- Student Loan deductions made from your employees
- subtracting any tax refunded to your employees
NICs
- adding together all the employees’ and employer’s NICs due
- subtracting any:
- SSP you are entitled to recover
- SMP/SPP/SAP and/or NIC compensation you are entitled to recover
Correcting an error
If you make a mistake when working out how much to pay to your Accounts Office, you can put it right by adjusting your next payment.
If you discover a mistake after the tax year has ended, contact:
- the Employer Helpline by calling Tel 08457 143 143 for advice about NICs, SSP, SMP/SPP/SAP, Student Loan Deductions
- your HMRC office for advice about PAYE.
Keeping records
We may ask to inspect your records to make sure that you have paid all the tax and NICs due. If you have not, we may calculate the amount that you will have to pay. Both the P32 Employer Payment Record and the P30BC, Payslip Booklet, pages 4 and 5, are designed to:
- help you make the calculations referred to above
- record your payments
You only need to use one of these forms to keep your records.
There is an on screen version of the form P32 on your Employer CD-ROM. It shows you how much PAYE tax, National Insurance contributions and Student Loan deductions are due to HMRC each month for all your employees entered on the P11 Calculator. It can also act as a record of payments made.
These forms will also help you fill in your P35, Employer Annual Return, at the end of the year.
Making a payment
Large employers, those who have 250 or more employees whom we have notified, have to make their monthly payments electronically.
We accept payment by a range of methods but we recommend payment is made electronically through your bank’s internet/telephone banking service, by BACS Direct Credit or CHAPS. You can also pay by debit card over the internet. Go to Billpay and follow the guidance. If you sign up with the BillPay service, you will be able to view your payment transaction and a history of your payments made via BillPay. Electronic payments are generally more efficient and secure than payment by post.
We also treat as electronic any payment made by Bank Giro or at the Post Office. If paying by Bank Giro, take your payslip, P30B, with payment to your own bank branch. Other banks may refuse to accept it or charge you for this service. Again, payment made by these methods is more secure than a payment sent in the post.
Where a payment is made by post, please send it with your completed payslip, P30B, to the Accounts Office in one of the envelopes we sent you.
For more information about how to pay please:
- visit the How To Pay area
- contact your Accounts Office:
When you pay by Bank Giro, at a Post Office, or by post you must complete a payslip, P30B:
- for the correct ‘period ending’ (see top right of P30B)
- showing the total amount due in the Amount due box
See the example of payslip P30B.
Use the information from the P32, or the table on pages 4 and 5 of your P30BC, to fill in the P30B as follows:
P30B box heading |
P30BC or P32 column number |
|---|---|
Amount due |
14 |
If, at the end of a month/quarter:
- you have no payments to make, you should inform HMRC. Unless you
tell us on or before the payment date that nothing is due, a payment
reminder may be issued. You can let us know by:
- completing the online ‘No PAYE/NIC Payment due form. The online ‘No PAYE/NIC Payment due’ form is a new service and the most convenient and cost effective way to let us know that no payment is due
- returning a signed payslip, form P30B, for the correct month/quarter marked ‘Nil due’
- phoning 0845 366 7816 to say no payment is due for a particular month/quarter, quoting your Accounts Office reference number.
- the ‘Net Income Tax’ payable in column 3 of your form P32 or P30BC is a minus figure, insert an ‘M’ (for minus) in front of the figure in this column
- the ‘Net NICs’ payable in column 13 of your form P32 or P30BC is a minus figure, because your total recoverable SSP/SMP/SPP/SAP and/or NICs compensation claimed is more than the NICs payable, insert an ‘M’ (for minus) in front of the figure in this column
- the ‘Amount due’ in column 14 of your P32 or P30BC is
a minus figure, recover the amount you are owed from
the following month’s/quarter’s payment and let us know
that no payment is due
If it is not possible to recover the amount you are owed from the following month’s/quarter’s payment, you can apply for funding. We may refuse claims where payments for previous month’s/quarter’s are not up to date.
You will need to determine whether the refund in column 14 is due in respect of the net income tax figure, the net NIC figure (due to the recovery of statutory payments) or both and make separate applications for funding for tax refunds and funding for statutory payments.
Funding for tax refunds
To apply for funding in respect of a tax refund:- complete the form
- send a letter or a fax to your Accounts Office
requesting funding in respect of a tax refund. You will need to provide
the following information:
o Accounts Office reference number (shown on the front cover of your P30BC Payslip Booklet or P30B letter)
o employer reference number (shown on the front cover of your P30BC Payslip Booklet or P30B letter)
o employer name and telephone number
o the number of employees you are applying for funding for
o the total amount required
Funding for statutory payments
To apply for funding in respect of statutory payments:
- Complete the form
- Send a letter or a fax to your Accounts Office requesting funding in respect of statutory payments. You will need to explain how you have worked out the amount owed and quote your Accounts Office reference number shown on the front cover of your P30BC Payslip Booklet or P30B letter.
Accounts Office Shipley - 01274 539651
Accounts Office Cumbernauld – 01236 785251
Further information about payments and payslips
There are special rules about making payments during a trade dispute. For details see the CWG2, Employer Further Guide to PAYE and NICs, under ‘trade disputes’.
If you need to post a payment to the Accounts Office and do not have a payslip (for example, if the payment is for an earlier year), please send your cheque with a covering letter showing:
- your address and telephone number
- your Accounts Office reference, shown on the front of your P30BC, Payslip Booklet, or on the P30B letter
- the period the payment is for
- the amount of PAYE and NICs you are paying
A reference checker is available which you will find useful if you are paying electronically through your bank’s internet or telephone banking service or by BACS Direct Credit. It will help ensure your payment is allocated correctly, particularly if your payment is for an earlier year.
Examples
- Example of P32 (extract) (PDF 67K)
- Example of P30BC (extract of page 4) (PDF 58K)
- Example of P30BC (extract of page 5) (PDF 53K)
- Example of payslip P30B (PDF 65K)
Part 5 - Taking on a new employee - including someone who has worked for you before
Who to treat as an employee
An employee is anyone you employ under a contract of service, and includes full-time and casual workers.
If the employee does not give you a form P45 because they claim to be self-employed, look at the terms on which you took them on.
Please see more information on how to decide whether someone is employed or self-employed.
If you are in any doubt, ask your HMRC office for help, and treat them as an employee in the meantime.
If your new employee tells you they have previously been claiming Jobseekers Allowance, tell them that to stop claiming they should contact the Jobcentreplus office on Tel 0845 60 00 643 or send back their ES40JP.
If your employee is a student please refer to the CWG2(2008) Employer Further Guide to PAYE & NICs.
The Home Office has introduced identity checks for all new employees in order to safeguard you from employing someone illegally.
For more information:
- phone the Home Office on Tel 0845 01 06 677
- Visit the Employing Migrant Workers website
National Insurance numbers
Importance of National Insurance numbers
The HMRC National Insurance Contributions Office issues National Insurance numbers to those approaching 16 years of age and to those working or claiming benefit so that NICs and credits can be correctly recorded on each person’s National Insurance account, Income Tax and other records.
You should ask your employee for their National Insurance number and they must let you know what it is, if known, when you ask for it. It is essential that you show the full and correct National Insurance number on all documents on which you record NICs.
Anyone who does not have a National Insurance number must apply for one when they start work by contacting Jobcentreplus on Tel 0845 600 0643.
The National Insurance number is important because it helps to link the information you will send us at the end of the year to your employee’s National Insurance account, Income Tax and other records. This in turn helps to protect your employee’s entitlement to benefits such as basic State Pension.
Use the correct National Insurance number
HMRC will no longer accept ‘temporary’ National Insurance numbers, for example:
TN220157M for a male born on 22 January 1957. This applies no matter which method you use to submit your forms and Returns (for example paper, online) so in all cases you should try to obtain the correct National Insurance number.
Identifying the National Insurance number
National Insurance numbers consist of two letters, followed by six numbers, followed by one letter, A, B, C or D. No other format is acceptable.
It will look something like this: AB123456C.
This National Insurance number is only an example and should not be used where an employee does not provide their National Insurance number.
If the National Insurance is not shown on the P45 in this format or the employee can’t remember their National Insurance number, see:
A new employee gives you a form P45
Form P45 is available to send online. For more information visit the PAYE Software Forms pages.
This section will take you step-by-step through the actions you need to take when you take on a new employee and they give you a form P45.
If a new employee doesn’t give you a P45
If the employee does not give you a P45 when they first start work you will have to follow a different set of steps.
What is a P45?
The P45 is a certificate providing details from your employee’s previous employment.
The P45 is a four-part form. Your employee should give you Parts 2 and 3.
If the employee gives you Part 1A of form P45, return it to them to keep.
What you will need
In addition to the P45 you will need a form P11 Deductions Working Sheet, or equivalent record.
There is a P45 checker on your Employer CD-ROM which you can use to check the figures on the P45. You can use this if you are using a paper form P11 Deductions Working Sheet or equivalent record, or creating a P11 using the P11 Calculator on your Employer CD-ROM.
If you are not using the P45 Checker on your Employer CD-ROM, you will need to check the P45 figures yourself using your manual tables. If you are going to calculate the tax and National Insurance contributions using the manual tables you will need:
- Pay Adjustment Tables, Tables A
- Calculator Tables or Taxable Pay Tables B and D
- NI Tables
Then follow Step 1
Using the P45 Checker on your CD-ROM
The P45 Checker will check the P45 figures for you and give you the figures to enter on the:
- P11 Deductions Working Sheet, or equivalent record
- Employer Database when creating a P11 using the P11 Calculator on your Employer CD-ROM
If you are going to use the P45 Checker you must follow the instructions in Step 1 first.
- After checking the figures on the form P45 using the P45 Checker, if you are using a paper P11 Deductions Working Sheet or equivalent record you will need to return to Step 2.
If you are creating a P11 using the P11 Calculator on your Employer CD-ROM follow Step 3 to find out which tax code to use then Step 7 for help completing the P45 Part 3.
Step 1 Checking form P45
- Check if the employee’s National Insurance number is entered
at item 2 of the P45. If item 2 is blank, or the National Insurance
number is not in the format described on the previous page, see ‘Tracing
National Insurance numbers’ for help on how to find an employee’s
National Insurance number and return to this page.
You can continue to pay an employee who does not give you a National Insurance number. You must make sure that you keep records and record the National Insurance number as appropriate once it has been traced.
- Check if items 6 and 7 of Part 3 agree with the corresponding entries on Part 2 of the P45. If they do not agree contact your HMRC office immediately.
Step 2 Preparing a form P11
Fill in boxes A to J at the top of the form P11 by using the information provided on the P45 such as the employee’s name, address, National Insurance number and date of birth, and your own details. If your employee has worked for you previously in the tax year you must complete a new form P11 for their latest spell of employment. For help on completing box K see the next step below.
Step 3 Deciding which tax code to use
- Check which tax year the P45 is for. To do this look at the leaving date at item 4. If the leaving date is in the current tax year (the period 6 April 2008 to 5 April 2009), use the table below to find out which tax code to use. Find the date of leaving in Column A then follow the instructions in Column B.
- A tax code is normally made up of one or more numbers followed by a letter. If the tax code on the P45 has only a number, add letter ‘T’ to the end of the code when you enter it on the P11 but do not alter the P45.
- If the P45 has a leaving date before 6 April 2008,, please refer to page 2 of the current Employer Helpbook E12 PAYE and NIC rates and limits for 2008-09.
B |
|
|---|---|
Employee’s P45 has a |
Employee starts working for you |
Employee’s P45 has a |
Employee starts working for you |
Use the guidance shown there and then return to this page to continue with Step 4.
Step 4 Deciding which rate of NICs to deduct
- All employees aged 16 or over and below State Pension age are liable to pay a standard rate of NICs known as contribution Table letter ‘A’ unless certain conditions apply.
- To help you decide the right rate of National Insurance that applies to your new employee look at the NI Tables flowchart (PDF 43K), then return to this page.
- Enter the appropriate contribution Table letter under which NICs are due in the ‘End of Year Summary’ section on the reverse side of the form P11.
Step 5 Which week or month number to use for the employee’s first payment
- The weekly and monthly charts (PDF 39K) will help you identify which week or month pay period number you should use for the first payment to your new employee.
- Look at these charts now and identify which pay period number includes the date of payment. This is the period to use. Now go to Step 6.
Step 6 Entering the P45 details on form P11
If the P45 is for the 2008-09 tax year and there is an ‘X’ in box 6:
- Enter ‘NIL’ as the previous pay and tax details in Columns 3 and 6 of the P11 on the line above the one you will use for the employee’s first payment.
If there is no ‘X’ in box 6:
- Enter in column 3 of the P11 on the line immediately above the one you will use for the employee’s first payment, the ‘Total pay to date’ shown at item 7 of the P45.
- Do not enter the ‘Total tax to date’ figure, shown at
item 7 of the P45, in column 6 of the P11. Instead, using the
- week or month number shown on the P45
- the appropriate code number (from step 3)
- the figure of ‘Total pay to date’
If the tax code starts with a ‘K’ complete columns 4b, 5 and 6 using the lower of the:- P45 tax figure
- tax due as shown by Calculator Tables or in Tax Tables B to D
- To work out the ‘total taxable pay to date’ for column 5 and ‘total tax due to date’ for column 6, see Part 2 of this Helpbook then return to this point.
If the P45 is for an earlier tax year
- Enter ‘Nil’ as the previous pay and tax details in columns
3 and 6 of the P11.
If there is a ‘Y’ in item 5, continue Student Loan Deductions (for whatever year) - Enter a tick in Box J of the form P11.
- Start making Student Loan deductions, if appropriate, from the first pay day. See Part 9 of this Helpbook.
Step 7 Fill in Part 3 of the form P45
- Start at item 8 of the P45:
- Item 8 - enter your PAYE reference (now known as Employer’s PAYE reference)
- Item 10 - only tick this box if you use works/payroll numbers and want that information to appear on any tax code notifications
- Item 12 - enter the code you are using if it is not the same as the one shown on the P45
- Item 13 - enter the figure of tax due if it is not the same as the amount shown at item 7 of the P45.
- Send Part 3 to the HMRC office that deals with you as an employer immediately after you have completed the above actions.
- Keep Part 2 of the P45 for at least three years after the end of the tax year it is for.
You can now start working out any tax and NICs due. To find out how to work out and record tax on form P11, see Part 2 of this Helpbook. To find out how to work out and record NICs on form P11, see Part 3 of this Helpbook.
A new employee doesn’t give you a form P45
If a new employee does not have a P45 you and your employee will probably need to complete a form P46.
The P46 is the form to tell HMRC about an employee who does not have a P45.
You can send forms P46 to us online using the internet.
See more information by visiting the PAYE Software Forms pages
You can also use the interactive form P46 or print blank copies from the ‘Forms and Helpbooks’ section of your Employer CD-ROM.
From April 2008, when a P45 is not provided, and you file your P46 forms online, your employee will not necessarily have to complete the form P46. If you file your P46 forms online you may obtain the information required by the form P46 from your employee, either online or on your own stationery. It is up to you to decide how to obtain the relevant information required by the P46 and whether you require a signature from your employee, for your own purposes. You can obtain the necessary information in a way that best suits your business need as long as you keep a record of where it came from.
If a new employee is going to work for you for one week or less and before the end of that week you do not arrange to keep the employee on beyond that week, or arrange for the employee to work for you again, you do not need to fill in a P46. Instead, follow the advice in the section - Taking on a new employee – for one week or less.
If a new employee is going to work for you for more than one week and does not have a P45:
- ask your employee to contact their previous employer to get a P45 if they have worked in the UK in the current tax year, unless a P45 has already been given to the employee, who has then lost it
- ensure that Section one of form P46 is completed in time for your employee’s first payday
Filling in form P46
The P46 is a two-sided form. An example of a completed form P46 can be viewed by following the links below:
- Example of a completed form P46 - section 1 (PDF 80K)
- Example of a completed form P46 - section 2 (PDF 63K)
Section one
There are four parts to Section one.
From April 2008 you have two options for how to complete Section one.
You can either:
- give the form to your employee and ask them to complete Section one, or if filing online
- ask your employee to supply the relevant information to enable you to complete Section one on their behalf.
- If you complete Section one on behalf of your employee it will be up to you to decide
- how to obtain the relevant information required on the form P46 (for example you could use your own stationery or email.) You must keep an adequate audit trail to confirm how this information was obtained and whether you require a signature from your employee for your purposes.
Your details
Your employee must provide their personal details. If your employee does not know their National Insurance number, follow the guidance under Tracing National Insurance numbers. You can send in a P46 without a National Insurance number if you have followed this guidance.
Date of birth From April 2009 you must show the date of birth on all forms P46. We strongly recommend that you start collecting this information from your employees now.
Male or female From April 2009 you must show the gender on all forms P46. We strongly recommend that you start collecting this information from your employees now.
Your present circumstances
Your employee must:
- read statements A, B and C and tick the one that applies, or if filing online
- provide you with information so that you can indicate which statement applies
Student loan
Your employee must:
- read the Section and tick box D if it applies, or if filing online
- provide you with information so that you can indicate if box D applies
Signature and date
- If your employee is completing the form they must sign and date Section one of the form.
- If you are completing the form on behalf of your employee because you are filing online, it is up to you to decide whether you need a signature for your purposes.
Section two – to be completed by the employer
You must complete Section two of the form. Tell us the date your employee started to work for you and provide us with your Employer details, including your PAYE reference. You can find your PAYE reference on correspondence from your HMRC office and on your yellow P30 Paying-in booklet. You should complete the Works/payroll number as you would like it to appear on any tax code notifications.
In the Tax Code Used section you should:
- tick box A, B or C in line with the box ticked in Section one
- refer to the table below to find out what tax code to use if you are unsure
On the form P46 |
Tax code to use |
|---|---|
Box A ticked |
*Emergency code on a cumulative basis |
Box B ticked |
*Emergency code on week 1/month 1 basis |
Box C ticked |
BR code on a cumulative basis |
No box ticked |
BR code on a cumulative basis |
*Use the emergency tax code shown on page 2 of the Employer Helpbook E12 PAYE and NICs rates and limits for 2008-09.
- Write the tax code you have used in the Tax code used box
Exceptionally, if your employee has not completed the form P46, or provided you with the information to fully complete Section one in time for their first pay day, you must complete Section one to the best of your knowledge on their behalf and use code BR on a cumulative basis.
You must send in a P46 for all cases on the employee’s first pay day. Prepare a form P11 when you first pay your employee.
When you have completed Section two continue in accordance with the instructions given below.
What to do with the completed P46
1. Employee ticked box A or box B and earnings in the week or
month are less than the NICs Lower Earnings Limit (see the Employer
Helpbook E12
PAYE and NICs rates and limits for 2008-09):
- keep form P46 for future use
- keep a record of the employee’s name, address and amount of pay
If the rate of pay increases at a later date to be equal to or more than the Lower Earnings Limit:
- look at the form P46 again
- take appropriate action based on the instructions below
2. Employee ticked box A and earnings in the week or month are equal to or more than the NICs Lower Earnings Limit (see the Employer Helpbook E12 PAYE and NICs rates and limits for 2008-09)
- prepare a form P11
- enter the employee’s pay in this week or month in column 2
- enter the employee’s total pay to date in this employment in column 3
- deduct and record tax in the normal way using the emergency tax code on a cumulative basis
- deduct and record NICs in the normal way - see the NI Tables flowchart (PDF 43K) if you are unsure which NI Table letter to use
- send the P46 to your HMRC office on your employee’s first pay day
3. Employee ticked box B and earnings in the week or month are equal to or more than the NICs Lower earnings Limit (see the Employer Helpbook E12 PAYE and NICs rates and limits for 2008-09)
- prepare a form P11
- enter the employee’s pay in this week or month in column 2
- deduct and record tax using the emergency tax code on a week 1/month 1 basis
- deduct and record NICs in the normal way – see the NI Tables flowchart (PDF 43K) if you are not sure which NI Table Letter to use
- send the P46 to your HMRC office on your employee’s first pay day
4. Employee ticked box C
- prepare a form P11 when you first pay the employee
- enter the employee’s pay in this week or month in column 2
- deduct tax using the Basic Rate ( BR ) code
- deduct and record NICs in the normal way – see the NI Tables flowchart (PDF 43K) if you are not sure which NI Table Letter to use
- send the P46 to your HMRC office on your employee’s first pay day
5. Employee ticked box D
- start making Student Loan deductions from the next pay day using
either the
- Student Loan Calculator on your Employer CD-ROM
- the SL3 Student Loan Deduction Tables (PDF 32K) also on your Employer CD-ROM, or from the Employer Orderline.
Preparing a form P11
- Using the information provided on the P46, such as the employee’s name, address, National Insurance number and date of birth, and your details, fill in the boxes A to J at the top of the form P11.
- If your employee has worked for you previously in the tax year you must complete a new form P11 for their latest period of employment.
- Enter the tax code in Box K of the P11.
Employee gives you a form P45 after the first pay day
If an employee gives you a P45 after the first pay day and you have already received the employee’s code from your HMRC office, destroy the P45. In all other circumstances follow steps 1 to 7 of the section headed A new employee gives you a form P45.
On the next pay day, unless the tax code is to be operated on a week 1/month 1 basis, add up the entries in columns 3 and 6 of the P11 including those:
- from form P45
- any pay and tax details since they started work for you
If you have included your new employee on the P11 Calculator you will need to follow Step 1, then edit the employee details in the Employer Database by including the P45 Checker result in the ‘Gross Pay’ and ‘Total Tax to Date’ boxes.
Taking on a new employee – for one week or less
If the employee is going to work for you for one week or less:
- do not complete a form P46
- take the following action, depending on what the circumstances are, but if you are a farmer first see the CWG2 Employer Further Guide to PAYE and NICs, under ‘Farmers’
Total pay in the week is equal to or more than the National Insurance Lower Earnings Limit* and you know the employee has other employment:
- Fill in a form P11.
- Deduct tax using code BR.
- Work out NICs due, see Part 3 of this Helpbook.
- Issue a form P45 at date of leaving.
Total pay in the week is equal to or more than the National Insurance Lower Earnings Limit* and you do not know if the employee has other employment:
- Fill in a form P11.
- Deduct tax using the emergency tax code on a week 1/month 1 basis.
- Work out NICs due.
- Issue a form P45 at date of leaving.
Total pay in the week is less than the National Insurance Lower Earnings Limit*
You do not have to complete a form P11 but you must keep a record of the employee’s name, address and amount of wages paid each pay period, for example weekly/monthly/four weekly.
* Details of the National Insurance Lower Earnings Limit are included in the Employer Helpbook E12 PAYE and NICs rates and limits for 2008-09, on your Employer CD-ROM. If you are reading this section after the end of April 2008, see the revised version on your Employer CD-ROM Budget Pack Edition.
Tracing National Insurance numbers
If the employee can’t remember or can’t find their National Insurance number check any documentation you may have for the employee that shows the National Insurance number, for example, form P45, or a certificate of election form CA4139(CF383).
If you are unable to find your employee’s National Insurance number:
- keep a record of their full name – surname and first name(s) – address, date of birth, gender
- if you have to send a form P46 to your HMRC office, take no further
action as they will automatically trace the employee’s National
Insurance number and tell you what it is.
If the National Insurance number cannot be traced, your HMRC office will ask the HMRC National Insurance Contributions Office to carry out a clerical trace, which may involve writing to your employee.
If the National Insurance number is traced, the HMRC National Insurance Contributions Office will confirm to you what it is on form P46-5, and confirm to your employee what it is on form P217.
If the National Insurance number cannot be traced, see Employee with no National Insurance number.
If you do not have to send a form P46, you can ask your HMRC office to trace a National Insurance number or, use the National Insurance number tracing service.
To use the National Insurance number tracing service you can either fill in form CA6855 (PDF 84K), which you can also get from:
- your Employer CD-ROM
- the Employer Orderline
or prepare your own schedule.
Preparing your own schedule to trace National Insurance numbers
This should clearly set out the information in the following order:
- Employee’s title.
- Surname.
- First name(s).
- Address.
- Date of birth.
- Gender.
- Works/payroll number.
- Date employment started.
- Date employment ended (if applicable).
- Employer’s PAYE reference.
If you require this information to be sent to your company agent, please make sure form 64-8 (Authorising your agent) has been completed.
Where to send form CA6855 or schedule
HM Revenue & Customs
National Insurance Contributions Office
Evening Work centre NI number tracing
Room BP3101
Benton Park View
Newcastle Upon Tyne
NE98 1ZZ
On receipt of the form or schedule of employees, the HMRC National Insurance Contributions Office will trace the employee’s National Insurance number.
They will return form CA6855 or the schedule, showing the correct National Insurance number for each employee, or indicate where an National Insurance number cannot be traced (see Employee with no National Insurance number).
When form CA6855 is returned to you, you should record the National Insurance number on all relevant pay records and tell the employee what their National Insurance number is.
Employee with no National Insurance number
If your employee has never had a National Insurance number or the National Insurance Contributions Office is unable to trace their number:
- Keep a record of their full name (surname and first name(s)), address, date of birth, gender, and
- Tell them to contact the Jobcentreplus office on Tel 0845 600 0643 or, in Northern Ireland their local Social Security or Job