Posted September 16, 2016

When do I need to set-up a PAYE scheme?

When you need to set up a PAYE scheme may seem confusing, but here are three common scenarios where employers need to ensure they are complying with PAYE regulations:

As an employer you do not need a PAYE scheme if you pay yourself or an employee under the Lower Earnings Limit (LEL) (for Tax Year 16/17 this is £112 per week) as long as none of your employees has another job or pension.

Example 1:

You employ members of 3 staff all earning £100 per week (no employee has any other job or pension).

The employer does not need to be registered for PAYE.

Example 2:

You take on a new employee earning £200 per week in addition to the 3 members of staff earning £100 per week.

The employer would need to set up a PAYE scheme, they must include all employees on the payroll, even if the employee earns less than the LEL.

Example 3:

You take on a new employee earning £100 per week who has a second job earning £200 per week.

The employer must deduct PAYE and NI from the new joiner and so needs to register for PAYE and include all of the employees on the payroll.

For more information, or help with setting up a PAYE scheme, please contact us.

The information contained above is provided for information purposes only and is not intended to amount to advice on which reliance should be placed. We therefore disclaim all liability and responsibility arising from any reliance placed on such information. Professional advice should be obtained before taking or refraining from taking any action as a result of the above contents.