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In the UK, payroll is the list of employees in your company and their salary details. You have to consider payroll when you’re a limited company with employees, but not as a sole trader. This is done by Pay As You Earn (PAYE).
When you’re on someone’s payroll, this means that you are paid regularly by an employer. It often means that you are an employee, but it can also be applied to freelancers and independent contractors.
How does UK payroll work?
Your salary is calculated by taking away certain payments such as:
You’ll see all of these deductions listed on your payslip, showing both your gross and net income.
For any business, setting up payroll is a requirement. You’ll use it to:
There are various different ways of doing UK payroll:
Be aware that you’ll have to send your pay deductions monthly to HMRC:
With any of these choices, you should make sure that you understand what’s involved. You’ll need all of the below information to be able to do the task yourself or to outsource it to an accountant:
To read more about how payroll works, take a look at the guidelines from HMRC.
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