Knowledge Centre

To pay yourself a monthly salary, you need to first set-up a payroll scheme with HMRC. This is known as a PAYE scheme. You’ll be happy to know that this registration is included in The 123 Way.

Registering your payroll

Once we have submitted the registration forms, HMRC will issue two PAYE reference numbers to us.

Once your PAYE payroll is set up, as a director you have three main responsibilities:

1. Calculate how much Income Tax and National Insurance is due on each salary payment.

2. Tell HMRC about any benefits and expenses that have been paid to any employees or directors during the year. This is known as the P11D form.

3. Report all payroll payments to HMRC in Real Time - i.e. as they happen.

All of the above is included in The 123 Way.

PAYE/NIC

There are three main types of payroll taxes; Income Tax, Employees National Insurance and EmployersNational Insurance.

The tax free allowance is £12,570, income up to this point is not liable to Income Tax, if you exceed £100,000 of total income then your tax free allowance decreases.

Above £12,570 the next £37,700 of salary is taxed at 20% known as the Basic rate. Above this is the Higher rate taxed at 40% up to £150,000. Above this is the Additional rate taxed at 45%.

The Employees NIC free allowance for 2022-23 is £12,570 so NIC is not payable on the first £12,570 of earnings.

Above this threshold salary has Employees NIC deducted at 8%. Until you earn above £50,270 which has Employees NIC deducted at 2%.

Your company also has to pay Employers NIC at the rate of 13.8% on any salary above £9,100.

All sounds a bit complicated - luckily The 123 Way includes full PAYE and NIC service to help run your payroll and full tax planning to ensure you and your company are as tax efficient as possible.