Agree with Ladymuck that if you are paying a fixed monthly fee, there is little point in using a payroll company, as HMRC provide Employer Helpline, plus a CD-ROM you use on your computer to work out tax/ni deductions.
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This Is An Example Only
Even if your figures are exactly the same, do NOT use my example... work it out yourself using the Employers CD-ROM and/or printed material from HMRC.
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P49 - Paying someone for the first time - this can be useful to read.
Has your employee (nanny) given you a P45?
If not, a P46 must be completed.
See P49 for details of how to get the starting tax code, from information provided on P46.
Box B I suspect is the most typical, which means you use 503L week1 or month1 (2006/2007 tax year only! See P49)
You need form P11 This is a big form, so hard to print out. As with all forms mentioned here, best to get them via the New Employer Helpline.
Also need to read the P11 Handbook (E11)
The Employers CD-ROM has a P11 Calculator on it, this makes the job much easier.
By Paying Monthly, you only need to do this 12 times a year, so while it may seem like hard work at first, it gets easier.
The starting point for the P11 is the Month which INCLUDES the first payday.
Your nanny wants paying at the end of the month.
To make things a little easier, lets set a specific date... lets say 25th of the Month. That would then leave a few days for a cheque to clear/bacs to transfer etc.
25 August 2006 falls in Month 5. So you start the P11 on line 18.
I will use a Gross Pay figure of £1690 per month (which is £78 per day based on a 5 day week). Obviously you will need to use the correct figure you have for Gross Monthly Pay.
As we are calculating based on days from start to month end (14 days), we need to work out some figures.
Annual Gross = £1690 x 12 = £20280
Weekly Gross = £20280 / 52 = £390
Daily Gross = £390 / 5 = £78
For Month 1, you are paying 14 days, rather than a full month.
Daily Gross x 14 = £78 x 14 = £1090
Look at Monthly Table A
CA38 - NICs
Assumption: Employee is Female, aged 16-59, Single, No pension, not a widdow, No other job
If your employee DOES NOT match that, then you may need to use a different NICs table - consult New Employers Helpline.
The NEXT SMALLEST figure to 1090, is 1088.
Using Table A:
Employees (nanny) NICs Contributions: £73.70
Employers (parent) NICs Contributions: £85.76
Now to work out the tax. Will assume tax code 503L (which can be used for Emergency Tax)
Again it is far easier to use the Employers CD-ROM to do this... it will come with the New Employers pack which you get when you register as an Employer with HMRC.
Pay Adjustment Calculator
Use the calculator to find out the tax free pay.
- P11 data -
Col2 = 1090 (pay for payday)
Col4a = 419.92 (figure Pay Ajustment Calculator)
Col5 = 670.08 (col2 - col41 = Taxable Pay)
HMRC have a PAYE Tax calculator on their website. Alas at present (Sat 19 Aug) it is being updated. Back online Monday 21 Aug.
So we will have to use the Tables: Calculator Method
Taxcode: 503L
P11 Col5 = 670.08
Month =5
Col5 is LESS than amount shown in Table SR (896.00), so
Col5 Rounded Down = 670
Multiply by 0.10 = 67
P11 Col7 = £67
Now to work out the Payslip
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1090.00 Gross Pay
73.70 minus Nat.Ins Contributions
67.00 minus Tax Deducted
949.30 Net Pay
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So the nanny is paid £949.30
Keep aside £73.70 + £67.00 + £85.76 (Employers NI)
Total: £226.46 for paying to HMRC later.
Employers NI figure came from CA38 (see NICs section above)
There you go... wasn't that hard... was it!
Disclaimer: I am not an accountant, I was just following the rules available at HMRC.gov.uk
It is best to do all this AFTER you have got your New Employers pack. So call them RIGHT NOW - 0845 60 70 143 (open 8am to 5pm Sat and Sun)
See New Employers - First Steps for details of information you need to give the New Employers Helpline.
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This Is An Example Only
Even if your figures are exactly the same, do NOT use my example... work it out yourself using the Employers CD-ROM and/or printed material from HMRC.
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