The following example is taken from MyPaye, your reports may have a slightly different format but the information they contain may be similar:

Understanding your payroll and statutory returns

Gross Pay (Earnings) – This is the pay before any deductions have been made as is the cost to your business

PAYE and NIC – This is what you will be liable to pay HMRC (this includes both Employee’s and Employer’s NIC)

Net Pay – This is what you issue to the staff directly

It should also be possible to submit a Full Payment Submission to HMRC (this is referred to as an RTI submission) via your software. Once you run payroll you should submit your RTI once you are certain you won’t be making any changes to it. You will need your Government Gateway ID and password for this.

Understanding your payroll and statutory returns

This means that HMRC will charge you the correct amount of tax and reduces any confusion.

As you run payroll, whether it is weekly or monthly you will build up a PAYE and National Insurance liability, this is important because although you don’t have to pay it immediately it is important to understand what you need to pay and when.

If you run both a monthly and a weekly payroll for a company using the same PAYE reference, you will only have one statutory return – this will include both payments.

After running your payroll and submitting the RTIs you will want to find your Statutory return which should be in your payroll software. This will give you 3 main pieces of information:

Understanding your payroll and statutory returns

1) The amount of Tax you have due

This will be the total of your P.A.Y.E and National Insurance liabilities, less any further deductions (such as SMP). If you are running a weekly payroll you will see that the statutory return payments will continue to change until all the weeks in the relevant month have been completed

 

2) The period the return relates to

Whether you run a weekly or a monthly payroll, you will still only be paying your statutory return on a monthly basis, so it is important to understand when each return is due for payment and what month or weeks it relates to.

Monthly payroll

The month is important, as this determines when you will need to pay the value by, your statutory return is always due by the 19th of the month following your payroll date.

Month 1: 25th April, payment due 19th May

Month 2: 25th May, payment due 19th June

Month 3: 25th June, payment due 19th July

…and so on through until month 12

Understanding your payroll and statutory returns

Weekly payroll

Although you will pay your staff weekly, you only need to pay HMRC Monthly.

Now as HMRCs tax year runs from 6th April – 5th April this means the first month will be 6th April – 5th May.

Therefore the month of your statutory return will include any weekly payrolls which have a payment date between the 6th of the current month and the 5th of the following month. This is not the date you physically pay them, but the date the payroll software generates for you. Your statutory return is always due by the 19th of the ending month of the return. A return may include between 3 – 5 weeks worth of payrolls.

Month 1: 6th April – 5th May, payment due 19th May

Month 2: 6th May – 5th June, payment due 19th June

Month 3: 6th June – 5th July, payment due 19th July

…and so on through until month 12

Understanding your payroll and statutory returns

 

If you run both a Weekly and a Monthly payroll for the same company

You will only have the one statutory return – this will contain the information for both payrolls relating to the relevant period

Understanding your payroll and statutory returns

 

3) The reference code you should use while paying.

The reference code should be used when you initiate the payment, this is important as it helps HMRC allocate the payment to the correct statutory return, which will be the information they received via your payroll’s RTI submissions.

An example of a reference code would generally look something like this:

Understanding your payroll and statutory returns

The following month’s statutory return will be almost identical, the only figure that will change is the final figure as this is a sequential reference number for the month.

It is important to allow HMRC allocate their payments in the same way as you do, otherwise, things can get rather messy and this means that you avoid any confusion and will understand your exact position with HMRC

 

Employer’s allowance

If you’re eligible for the £2000 employers allowance against National Insurance many payroll softwares will not automatically assume you are entitled – you may need to select the option to claim this in your payroll software.

If you run more than one payroll for the same company you can only apply this allowance to one of the payrolls. You should apply this to the payroll which is most likely to claim the most of this allowance. You will the impact this has on your statutory return under the “Deductions” section.

Understanding your payroll and statutory returns

 

Director’s salary

If you are a Director it is very important to run yourself through payroll, as this way you can reduce your director’s loan account and give yourself a steady income stream while also avoiding your chances of becoming overdrawn. This will ensure you pay any necessary tax and national insurance while it also allows you be entitled to Class 1 NIC benefits.

The maximum amount you can pay yourself through payroll for tax year 2014-2015 before paying National Insurance currently stands at £663 per month (£153 per week). Paying yourself more than this will entitle you to your Class 1 NIC benefits.

Your annual director’s salary will also have some degree of a tax shield, dependant on the tax code HMRC issues you – this means that you can decrease your personal tax liability by running a payroll for yourself, of course the company will need to pay any necessary National Insurance and PAYE payments for this.

 

Reviewing your position with HMRC

You can log in to HMRC’s website using your Government Gateway ID and password to view your PAYE account, this means you can see any returns which have been received and also see what is due.