Self Employed Person Taking On First Employee

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JamesB
JamesB Registered Posts: 51 Epic contributor 🐘
in General accounting discussion
Good afternoon all,

Just a quick question regarding a self employed plumber who wants to take on an apprentice paying him low wages (legal min wage) and sending him off to college.

Am I right in saying he will have to register for PAYE for an employer and pay him through this way? He won't have any tax / NI to pay as will not be earning enough.

It will be the apprentice's first job as well so will he need to fill out a P46?

Any other advice on what needs to be done is very much welcomed.

Is there any free software out there that can calculate his net pay, print payslips etc?

I have very little previous experience with anything payroll related so any advice will be appreciated.

Regards,

JB

Comments

  • Lina
    Lina Registered Posts: 41 Regular contributor ⭐
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    Hi,

    Yes,you have to register plumber for PAYE and every year submit P35. New starter will have to complete P46.

    Optionally you can register him for CIS as plumbing jobs fall under the scheme. But there is no advantage to both, as he would have to deduct 20% from the trainee and pay it every month to HMRC even the minimum is earned.

    Not sure about free software for running payroll, but I am sure that HMRC have their free software as I remember they used to send out discs before. Maybe now, there are no discs , only link on their web.
    Talk to New Employers helpline.
  • JodieR
    JodieR Registered Posts: 1,002 Beyond epic contributor 🧙‍♂️
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    Sorry Lina but I don't agree with your answer!

    your client will only need to register as an employer if the employees earnings exceed the lower earnings limit. If you're only paying the apprentice wage then it's unlikely this will be exceeded.

    The employee will need to complete a P46 (or may get away with providing the P46 information in another format) but the employer doesn't need to submit this info to HMRC until the LEL is exceeded.

    THe employer is probably still obliged to provide payslips. If the employee is under the LEL you can probably just create a payslip in word or excel as it will be very simple. If you do need to calculate Tax & NI then you can use HMRC's software to do so but I don't think that you can create payslips from that software. There are alternative payroll systems but as I use quickbooks for all my payrolls I can't really advise on which are better than others.
  • jamesm96
    jamesm96 Registered Posts: 523
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    Just to throw a spanner in the works, I hear that under the RTI reporting which is shortly coming in, all employees will need to be reported on a monthly basis regardless of the amount of pay. Perhaps I've been misinformed, but that's how I currently understand it. I know it doesn't matter for now but, going forward...


    Also, re. the above, taking on an apprentice as a CIS subcontractor would probably not be the right treatment; HMRC have their Employment Status Indicator (ESI) which will help you to decide whether a person is an employee or a subcontractor; if they're an employee then put them on the payroll (or treat as Jody described, depending on earnings) and if they're a subcontractor then report as such using the CIS monthly returns.
  • JodieR
    JodieR Registered Posts: 1,002 Beyond epic contributor 🧙‍♂️
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    jamesm96 wrote: »
    Just to throw a spanner in the works, I hear that under the RTI reporting which is shortly coming in, all employees will need to be reported on a monthly basis regardless of the amount of pay. Perhaps I've been misinformed, but that's how I currently understand it. I know it doesn't matter for now but, going forward....

    Interesting, I didn't know this!

    jamesm96 wrote: »
    Also, re. the above, taking on an apprentice as a CIS subcontractor would probably not be the right treatment; HMRC have their Employment Status Indicator (ESI) which will help you to decide whether a person is an employee or a subcontractor; if they're an employee then put them on the payroll (or treat as Jody described, depending on earnings) and if they're a subcontractor then report as such using the CIS monthly returns.

    I meant to mention that too, totally agree.
  • Gem7321
    Gem7321 Registered Posts: 1,438 Beyond epic contributor 🧙‍♂️
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    Agree with Jodie and James.

    James, I too wasn't aware of this with RTI. Do you have any further info?
  • jamesm96
    jamesm96 Registered Posts: 523
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    Gem7321 wrote: »
    Agree with Jodie and James.

    James, I too wasn't aware of this with RTI. Do you have any further info?

    Not that I can pass on, no; one of my colleagues went on a course on Thursday so this was just from her update after she got back. Clients are going to start asking me pretty soon though so I need to get my head around it!

    Mike.
  • Gem7321
    Gem7321 Registered Posts: 1,438 Beyond epic contributor 🧙‍♂️
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    I'm going to an RTI branch event next week so hopefully it will come to light then. Thanks anyway!
  • Fireraiser
    Fireraiser Registered Posts: 91 Regular contributor ⭐
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    From http://www.hmrc.gov.uk/payerti/getting-started/rti.htm. This will affect all employers between April and October 2013. I'm telling all my clients to get their currently exempt staff on payroll in April (makes my life easier!)

    Lower paid, temporary, irregular and casual staff
    You'll need to report payments to all staff no matter how much you pay them, even those earning below the Lower Earnings Limit (LEL) or those paid just once a year. So you'll have to enter details of these employees onto your payroll system. Be sure to get their employment status right.
    If appropriate, set the irregular payment indicator so HMRC doesn't assume that they've left your employment just because they haven't worked for a while.
  • jewels.p
    jewels.p Registered Posts: 1,774 Beyond epic contributor 🧙‍♂️
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    If you are taking someone on and they are earning below the LEL why do you still have to let HMRC know if there is no NI or Tax to pay?
  • Gem7321
    Gem7321 Registered Posts: 1,438 Beyond epic contributor 🧙‍♂️
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    Q: Is an employer required to submit RTI returns if they do not currently have a PAYE scheme to submit PAYE returns and do not have any employees earning above the LEL?
    A: The operation of PAYE remains the same under RTI. So if an employer is not required by law to complete a 'deductions working sheet' for any employee, the employer will not be required to operate PAYE, so not subject to RTI, or have a PAYE scheme.

    http://www.hmrc.gov.uk/rti/employerfaqs.htm
  • Fireraiser
    Fireraiser Registered Posts: 91 Regular contributor ⭐
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    I have a client who pays her staff weekly, but I produce 4-weekly payslips to save her money. I'm not sure if the extract below says this will no longer be permitted

    Q: I pay my employees monthly, which is when they receive their payslips. However, I also make 'interim' payments mid-month, when I pay my employees a proportion of the net pay they would otherwise receive at the end of the month. Do I need to send an FPS for these interim payments?
    A: Under the regulations, whenever a payment of PAYE employment income is made, PAYE should be operated.
    You can find guidance on whether a payment should be treated as salary on account, and therefore subject to PAYE, or a loan or advance which is generally not subject to PAYE, in HMRC's Employment Income Manual - see the link below.
    EIM42280 - Employment income: basis of assessment for general earnings: the time when earnings are received

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