What do I need to know about the PAYE rates?
As an employer it’s important that you keep up to date with new legislation especially those which impact your employees. When submitting payroll it’s vital that you are paying everyone as per the thresholds set by HMRC. There are so many different possibilities which may affect the rates you pay your employees, so here’s what you need to know about PAYE.
PAYE tax
The tax you deduct from your employees wages varies as it is dependent on their individual tax code. Their tax code is determined by their personal allowance.
This can often be quite confusing. People assume that if they are for example earning £50,000 that they will be taxed 40% on that whole amount. This isn’t the case.
Someone earning £50,000 would not be taxed on the first £12,570 they make.
Anything above this amount up to £37,700 will be taxed at the basic rate.
Then the amount from £37,701 to £50,000 would be liable for the higher rate of tax at 40% so the 40% would only be deducted from £12,299 of their earnings.
The same tax rates apply to Self Employed and Sole Traders although the amount calculated is from profits not just from the wage you pay yourself.
If you need advice on paying HMRC please get in touch, we would love to help.
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