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There are different forms associated with PAYE. These are:
P45: A P45 form is issued to an employee when he or she stops working for you. It shows how much the employee has paid in tax and NICs throughout the tax year.
P60: A P60 form is an official form issued to employees at the end of the tax year. The form indicates how much the employee has earned over the tax year, as well as the amount they've paid in PAYE income tax and NICs. You need to issue the P60 to your employees by 31st May each year.
If you’re a limited company director, you’re considered both an employer and employee. As such, you’ll have to issue yourself a P60 form.
P11D: The P11D is a tax form that records employment benefits that the employees and directors of a company have received across the year.
A copy of the P11D is to be issued to employees who’ve received certain benefits by 6 July each year. You should also submit the form online by the same date. If you’re paying tax on all their benefits through your payroll, submitting a P11D isn’t required.
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What are BACS and CHAPS payments?
CHAPS-an abbreviation for Clearing House Automated Payment System-is a same-day bank-to-bank payment system. It is typically used for large, one-time payments, as the transfers are relatively expensive to process. There are no upper or lower limits to the amount that can be transferred.
BACS, or Bankers' Automated Clearing Services enables payments to be made electronically from one bank to another. The transfer method handles all debit and credit card transactions, has an upper limit of £250,000 per transfer and is mainly used for low-value transactions. BACS payments take three working days to clear.
What are Accruals?
Accruals refer to revenue that have been earned, or expenses that have been incurred but aren't yet recorded in a company's accounts.
Examples of accrued expenses include wages payable, bonuses, interest on loan and goods received.
One example of accrued revenue is accrued interest.
On the balance sheet, accrued expenses are recorded under the current liabilities section, while accrued revenue are recorded under the current assets section.
What is Amortisation?
In business accounting, amortisation is a method of calculating the value of a business asset over time. It is the process of spreading out the cost of an asset over its useful life.
In relation to loans, amortisation refers to the spreading out of loans into a series of fixed monthly installments.
What is Employment Allowance?
Employment Allowance enables eligible employers to reduce their National Insurance bill by up to £4,000 each year.
What are benefits in kind?
For self-employed persons or employers, it can be challenging trying to understand the rules surrounding benefits in kind. These can be complicated; some benefits are taxable while others aren't, and it gets tricky figuring out which rules apply to your situation.
To make things a little easier to understand, we've written up a quick guide below. After reading our guide, you'll understand what benefits in kind are, have a clearer idea of which ones are taxable (and which ones aren't), and get an overview of what you need to do when it comes to reporting and paying taxes on benefits in kind.
Do keep in mind that this isn't a definitive guide, as HMRC's decision to impose a tax varies by situation. If you need specific advice, doconsult our specialist accountants at Forma.
10 new business obligations when hiring your first employee
Being a solo entrepreneur is an exhilarating experience, but eventually, a successful business will create enough work for more than two or three people to handle.
This leads naturally to the hiring of your very first employee, maybe even more than one. However, there is a big difference between being self-employed as a solo contractor and being an official employer.
You may be used to taking care of your own income, taxes, and workplace concerns but as an employer, you are suddenly responsible for the livelihood of one or more other people. People to whom you will be their boss with all the nitty-gritty details packaged with it.
Fortunately, you're an ambitious and successful entrepreneur ready to take on the challenges of graduating from a solo contractor to an excellent employer.
To help you, we have put together a comprehensive list of your new responsibilities that manifest the moment you choose to hire your first employee.
What are Cost of Sales?
The cost of sales is the accumulated total of all costs used to create a product or service, which has been sold. The cost of sales is a key part of the performance metrics of a company, since it measures the ability of an entity to design, source, and manufacture goods at a reasonable cost.
What is a PAYE Annual Return?
The P35 is an annual tax return completed by employers. The form indicates the total tax and National Insurance contributions for each employee during the previous financial year.
With the introduction of the Real Time Information reporting (RTI), the P35 is no longer required.
What are Assets?
An asset is any resource that is owned by a company. There are two main types of assets: current assets and non-current assets. Current assets are expected to be consumed within a year, while non-current assets are expected to be held for longer than a year.
When do I make PAYE payments to HMRC?
If you're paying salaries to employees or directors, you need to register for PAYE and pay your PAYE bill to HMRC.
- Monthly payments: Your PAYE bill is due on the 22nd of the next tax month.
- Quarterly payments: Your PAYE bill is due on the 22nd after the end of the quarter.
There are various ways to make your payment.
- Same or next day payments: online or telephone banking, CHAPS
- Payments processed in 3 working days: debit or corporate credit card payments (online), Bacs, cash or cheque payments at your bank or building society, Direct Debit, by cheque through the post
- Payments processed in 5 working days: Direct Debit (if it's the first time you're setting up a Direct Debit payment)
What is Retained Profit?
Retained profits, or retained earnings are profits that a firm has earned to date (after deducting dividends or other distributions paid out to investors) and are retained in the company's accounts. In a balance sheet, retained profits are included under the owner's equity section.
What is a Balance Sheet?
A balance sheet is a financial statement that provides a snapshot of the financial condition of a company, showing how much it owns (assets), owes (liabilities) and the amount that is left over for its owners (owners' equity) at a specific point in time. It is typically completed at the end of a month or a financial year.
What are Bank Deposits and depositing cheques?
A bank deposit involves placing money into an account with a banking institution. Depositing a cheque is one way to make a deposit. You can also deposit cash or make a funds transfer.