Employers - Frequently Asked Questions

PAYE - day to day payroll

General

Q. What does it mean when a code number says week 1 or month 1?

A. When a code is operated on a week1/month1 basis this means that you use week 1/month 1 of the Tax Tables on each weekly or monthly pay day. This basis is non-cumulative, which means you don't add the pay and tax to the previous weeks or months figures of pay and tax.

Q. I took on a worker who says he is self-employed. Does that mean I don't deduct tax and NICs?

A. As you are paying the wages you must decide whether the worker is employed or self-employed. Obtain a copy of guide ES/FS2 (PDF 60K) which will help you decide. If you are unable to decide contact the Employment Status Inspector at your PAYE office for guidance. If you decide that the worker is self-employed he is responsible for his own tax and NICs and you should not deduct them from the payment. If you decide that he is an employee, deduct tax and National Insurance in the normal way.

Q. When do I have to start deducting NICs from my employee's wages?

A. NICs should be deducted from an employee's wages providing

  • they are over age 16
  • they are under state retirement pension age
  • their earnings are above the weekly, or equivalent, Earnings Threshold (ET)

More information about deductions

Q. An existing employee wants to give me a P45 Part 3 from a second job they've just left - can I accept it?

A. No. Please advise the employee to send the P45 Part 3 to their local office. The local office will review the code and issue an amended one if appropriate.

Q. If an employee has left my employment can I continue to give tax rebates if there are no further earnings and the tax year has not finished?

A. Make any tax repayments to the date the employment ends. No further repayments should be given.

Q. Do I need a medical certificate before paying SSP?

A. Employers do not require medical evidence before paying SSP. If an employee satisfies all the conditions to receive SSP and the employer has no reason to doubt the incapacity, SSP can be paid without medical evidence.

Q. My accountant/agent completes and files my return why have you charged me penalties?

A. Section 98A TMA 1970 allows us to charge penalties, and these are directed to the person who is responsible for completion of the end-of-year returns. As shown in Regulation 43(1) Income Tax Employments Regulations 1993 this is the employer's responsibility.

Q. I am making a pension payment for the first time that includes some previous outstanding monthly pension payments. How do I tax this payment?

A. You should tax the payment as one lump sum using the appropriate tax code number on a week 1 or month 1 basis. For information about which tax code to use, please refer to chapter 2 of the Employer Helpbook CWG2 Employer Further Guide to PAYE and NICs.

More information covering some less common situations for payers of pensions and annuities is also available in our supplementary Guide for Pension and Annuity payers.

Q.Why is the employee's address so important and what do I do if I don't hold a full address within my Payroll records?

Income Tax (PAYE) Regulations 2003 (paragraphs 42 & 46) state employers must provide us with an employee's address when they notify us of an employee starting employment.

It is up to employers to decide how they want to get any missing address information. HMRC cannot advise on how this should be done. However some employers have told us that they find the Royal Mail website useful in helping them trace address details where the information provided by the employee is incomplete.

Useful links to further guidance and information

 

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