Keeping financial records for your Personal Assistants may at first seem daunting, but with the right support and training in calculating your employee's Tax and National Insurance deductions, using the Simplified Deduction Scheme is reasonably straightforward.
When should I make deductions?
If you take on someone to work as a Personal Assistant you may be legally classed as their employer, and may have to deduct Income Tax and National Insurance contributions from their wages through the PAYE (Pay As You Earn) scheme. You are required to report this information to HMRC each time you pay an employee.
When you must operate PAYE
Whether or not you need to operate PAYE depends on your employee's overall earnings. The figures below are relevant for the tax year 2015-16.
- If you pay them less than £112
If you pay your employee less than £112 a week and they don't have another job elsewhere - or other taxable income such as a pension - you don't have to do anything.
- If you pay them between £112 and £155 a week
If you pay your employee between £112 and £155 a week inclusive and this is their only job and they don't get other taxable income, there are no tax or National Insurance contributions due, but you'll need to keep a record showing how much you pay them.
- If you pay them more than £204 a week
If you pay your employee more than £204a week you'll have to operate PAYE.
- If they have another job or other taxable income
If your employee has another job - or other taxable income, such as a pension - you'll need to operate PAYE no matter what they earn. This is because their tax-free allowances will normally be set against the pay from their main job or pension, which means tax may be due on their earnings from you.
Simplified Deduction Scheme
The Simplified Deduction Scheme was a way of operating PAYE for care or support employees which requires less form filling than the PAYE schemes operated by most employers. However this scheme closed for new employers on 5 April 2012.
As part of operating PAYE, almost all employers must now use Real Time Information (RTI) and report their payroll information online, with some exemptions. The exemptions include those employing someone to provide care or support services at or from their home, provided the following conditions are met:
- the care or support services must be provided to the employer or a member of their family
- the recipient of the services must have a physical or mental disability, or be elderly or infirm
- the employer must be filing their return themselves, not having someone else (such as a relative or accountant) file it on their behalf
Employers who meet these conditions can choose to submit paper returns instead of online submissions until 2017 by which time you will be expected to submit returns online or arrange for a third party to act on your behalf.
Real Time Information (RTI)
From 6 April 2013 employers started reporting PAYE information to HM Revenue & Customs (HMRC) in real time. This is referred to as Real Time Information - or RTI. This means that employers have to:
- send details to HMRC every time they pay an employee, at the time they pay them
- use payroll software to send this information electronically as part of their routine payroll process
There is a PAYE Basic Toolkit available from HM Revenue and Customs to assist employees in calculating PAYE and keeping records. To obtain the Toolkit click here.
For more information on RTI click here.
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, £155 per week in this tax year 2015-2016 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 HM Revenue and Customs to assist you clarify your situation and that of your employee. National Insurance is still applicable at £112 per week. If your employee is earning under £155 per week gross in their first/other job, they may be entitled to a reduction in the amount of Income Tax you are deducting from the wage you are giving them. To ensure they are on the correct tax code, your employee should contact their local tax office.
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 45p 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 45p per mile up to the first 10,000 miles. It is important that you continue to keep records of travelling expenses for HM Revenue and Customs. Should you decide to give your employee 'one-off' payments for travelling, this will be treated as part of his or her wages and therefore taxable.
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 leave the National Insurance field blank and HMRC 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?
Give your employee a pay slip (available from most good stationers or a pay slip template will be available on the CILNI website), which shows the pay date, gross pay, deductions, net pay, along with the names of the employee and employer.
What about Statutory Sick Pay and Maternity Pay?
If your employee's earnings are above £112 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 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. If your Personal Assistant tells you that he/she is self-employed, consult the "Employing Self-Employed PAs" information sheet (available on the CILNI website) on this subject.
- 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 NI or the HM Revenue and Customs.
HMRC New Employer's Helpline 0300 200 3211
HMRC Existing Employer's Helpline 0300 200 3200
This information sheet offers guidance only.