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In the UK, payroll is the list of employees in your company and their salary details. Of course, there is a lot more to it, which we’ll go into later, but this is the basic breakdown. You have to consider payroll when you’re a limited company with employees, but not as a sole trader.
When you’re on someone’s payroll, this means that you are paid regularly by an employer. Often it means that you are an employee, but it can also be applied to freelancers and independent contractors.
Your salary will be paid to you with certain costs deducted which include:
You’ll see all of these deductions listed on your payslip, showing both your gross and NET pay.
For any business, setting up payroll is a crucial requirement. You’ll use it to calculate your employees’ pay, their tax contributions, to actually pay them (which is pretty important!) and to report the payment details to HMRC. If they’re repaying their student loan, you’ll also report these details to the Student Loans Company.
There are various different ways of doing UK payroll:
And 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.