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Tax and National Insurance Deductions
Keeping financial records for your Personal Assistants may at first
seem daunting, but with the right support and training calculating
your employee’s Tax and National Insurance deductions, using
the Simplified Deduction Scheme is reasonably straightforward.
When should I make deductions?
If you employ a Personal Assistant you may be liable to deduct
Tax and National Insurance from your employee and pay it to the
Inland Revenue, together with an additional employer's contribution.
The following conditions will determine whether or not you should
use the scheme;
* In the current tax year (2008-2009) the Lower Earnings Limit
is £90 per week but Income Tax only applies to earnings above
£116 per week (the 'Primary Threshold'). Although your employee
will not pay tax on earnings between £90 and £116 per
week, they will be treated as having done so to build up entitlements
to contributory benefits. National Insurance Contributions will
be applicable at or above £105 per week.
What is the Simplified Deduction Scheme?
The Simplified Deduction Scheme is designed to make the calculation
and deduction of Income Tax and National Insurance Contributions
simpler for small employers including individuals using Direct Payments.
Full training on starting and running the scheme is available from
Centre for Independent Living – Belfast or the Inland
Revenue.
What if this is a second job for my new employee?
If your new employee already has a job and a tax code when starting
working for you and does not intend to leave his or her original
job, he or she will be required to pay the basic rate (20%) tax
and potentially National Insurance Contributions (NIC) on the job
you are offering.
Your employee may be earning less than the Primary Tax Threshold,
£116 per week in this tax year 2008–2009 in his or her
other job. If this is the case, your employee may pay tax up to
the Primary Tax Threshold under his or her tax code with the other
employer. This will avoid overpayment of tax by the employee. You
can ask the Business Support Team at the Inland Revenue to assist
you clarify your situation and that of your employee. National Insurance
is still applicable at £105 per week.
What tax is payable on travelling expenses?
If your employee is using his or her own vehicle on your behalf
you may pay travelling expenses. These are not taxable if you pay
40p per mile or less for the first 10,000 miles if records are kept.
After 10,000 miles, travelling expenses should be paid at 25p per
mile to avoid paying tax.
As you start each new tax year, you can resume paying 40p per mile
up to the first 10,000 miles. It is important that you continue
to keep records of travelling expenses for the Inland Revenue.
Should you decide to give your employee ‘one-of’ payments
for travelling, this will be treated as part of his or her wages
and therefore taxable.
What happens when I take on a new employee?
New Employers should;
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Contact the New Employers’ Help-line on 0845 6070143
to register as a new employer. The New Employers' Help-line
will then send your details to your local tax office.
-
Complete and return form P16a (available from the New Employers'
Help-line). You do not need a P45 for your new employee when
running a Simplified Deduction Scheme. If your new employee
gives you his or her P45, you should not fill it in. Send parts
2 and 3 of any P45 with your form P16a to your local tax office.
When your local tax office sets up your Simplified Deduction Scheme,
you will be sent a starter pack which contains;
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A Simplified Deduction Card (P12) that already shows the ‘free
pay’ that your employee is entitled to earn per year without
incurring tax.
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Simplified National Insurance tables.
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An instruction leaflet (P16).
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Information about the Simplified Deduction Scheme (P25).
You will be issued with a payments book shortly after your scheme
has been set up. You can pay your local tax office at quarterly
intervals.
Existing employers should
What if my employee doesn’t give me a National Insurance
number?
If your new employee does not have a National Insurance number,
you should advise him or her to contact the nearest Social Security
office.
If your employee cannot provide you with his or her National Insurance
number for any other reason, you should send form P16a to your local
tax office and they will trace the number. Give your Personal Assistant
a copy of his or her National Insurance number and advise your employee
to keep it in a safe place for future reference.
What should I do on Payday?
On payday complete form P12 for each employee using the step-by-step
instructions and tables supplied;
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It is important to keep the P12 up-to-date. You should fill
it in each time you pay your staff wages.
-
Give your employee a payslip (available from most good stationers),
which shows gross pay, deductions and net pay.
What should I do at the end of each quarter?
On the following dates (5 July, 5 October, 5 January and 5 April)
you should total all your Income Tax and National Insurance (employer
and employee contributions) and any other deductions you have made.
-
Use a separate card P12 for each employee. Pay the Inland
Revenue a lump sum for all of your employees.
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It is important to pay the Inland Revenue no later than the
19th of the relevant month otherwise you may have to pay interest.
What happens at the end of the tax year (5 April)?
You will be issued a form P37 in January/February each year;
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As soon as possible after 5th April each year you should total,
sign and date all (one for each employee) cards P12.
-
Pay remaining payments of Tax and National Insurance deductions
to your local tax office by 19th April to avoid interest charges.
-
Avoid further charges by sending forms P37 and P12 to your
local tax office by 19th April.
What about Statutory Sick Pay and Maternity Pay?
If your employee’s earnings are above £90 per week
you may have to pay;
Click on the links above for more information on Statutory Sick
Pay and Statutory Maternity Pay.
What should I do if my employee requires his or her Tax Code changed?
If your employee requires his or her code number to be changed
do not alter P12 details;
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Your employee should contact his or her local tax office and
request a new form P12.
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When you receive your new form P12, you should complete the
old P12 by totalling all entries.
-
Send your old (completed) P12 to your local tax office.
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Pay any Tax and/or National Insurance Contributions due, to
your local tax office.
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You should not transfer any old P12 details to your new form
P12.
What should I do if my Personal Assistant claims to be Self-employed?
Personal Assistants are unlikely to be self-employed. Individuals
cannot choose to become self-employed without first obtaining permission
from their local tax office. For more information contact;
Status
Inspector
Inland Revenue Belfast
Beaufort House
Wellington Place
Belfast BT1 5ES
Telephone 028 90538 057
Textphone 0131 453 7238
What if my Personal Assistant leaves?
When a Personal Assistant leaves your employ you should follow
the procedure below;
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Do NOT issue a P45.
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Complete card P12 and return it to your local tax office.
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Keep a copy of the P12 for your records.
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Make any payments regarding the leaving employee to your local
tax office promptly.
What else do I need to know about Tax and National Insurance deductions
using the Simplified Deduction Scheme?
- If your employee is over retirement age he or she does not
pay National Insurance Contributions but they may be liable for
Income Tax.
- Please remember that the National Insurance and Income Tax thresholds
change every April.
- Keep your records up-to-date. If you have real difficulty with
the paperwork, you could assign it as a duty of a Personal Assistant.
The Trust may agree to pay for a book keeping service as part
of the Direct Payments package.
- For further help, contact Centre for Independent Living –
Belfast or the Business Support Team at the Inland Revenue.
Inland Revenue
Beaufort House
31 Wellington Place
Belfast BT1 6BH
Telephone 028 9053 2755
Fax 028 9053 2524
This information sheet offers guidance only. You should contact
your local tax office for advice relevant to your circumstances.
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