PAYE: beware the late payment penalties

We consider the penalties and key features of the PAYE system.

Under the Pay as You Earn (PAYE) system, it is the duty of the taxpayer to make sure that any payments to HMRC are made on time. HMRC will not send reminder letters when a payment becomes due, so it's important to make sure you keep on top of the deadlines.

Here we consider the penalties for non-payment of any tax due, and the key features of the PAYE system.

In the past, late payment charges were applied at the end of the tax year. Nowadays, however, interest on late PAYE payments is charged at a daily rate of 2.75% on the amounts outstanding.

HMRC will charge interest on all unpaid PAYE tax, Class 1 national insurance contributions (NICs) and student loan deductions. Employers may also be charged a penalty if they don't pay what they owe in full.

PAYE payments are due by the 22nd of the month following the end of the tax month to which the payment relates. So, payments for January must be cleared with HMRC by 22 February. Cheque payments must be made by the 19th of the relevant month.

Abiding by the Real Time Information (RTI) rules

Under the RTI regulations, businesses are required to make regular PAYE submissions for each pay period during the year. These submissions should detail payments and deductions made from employees each time they are paid. Employers must make two main submissions to HMRC: a Full Payment Submission and an Employer Payment Summary.

On or before the date that their employees are paid, employers must submit a Full Payment Submission to HMRC. Meanwhile, the Employer Payment Summary must be supplied to HMRC every month, and must outline instances where no employees were paid in the tax month, where the employer has received funding in advance to cover statutory payments and where such payments are recoverable. The Employer Payment Summary must also cover cases where Construction Industry Scheme (CIS) deductions are suffered, which could be offset. 

Running payroll

Running payroll accurately is crucial. Payroll software, other than HMRC's Basic PAYE Tools program, can be used in the management of an employer's payroll requirements.

However, it is crucial to understand how the PAYE system works, and to not rely too heavily on specialist technology. Please talk to us before making any decisions.    

Be aware of compliance visits

HMRC inspection teams can carry out a visit at any time, so it is vital that employers are prepared. HMRC will check to ensure that the employer is operating PAYE properly - if it discovers any under-deductions, employers will be liable. We can help you to prepare for a compliance visit - please contact us for more information. 

As your accountants, we can help to relieve the PAYE burden and avoid overdue payments with our comprehensive payroll service. We can effectively administer PAYE, generate customised payslips and provide advice on selecting the most appropriate software for your needs. For more information, please contact us.


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