Basic PAYE Tools: What Is It? And Is It Really the Best Solution for You?

Posted on

What are ‘Basic PAYE Tools’? Does an employer have to use it? You might want to register with HMRC as an employer for many reasons. You may be an owner of a small business or an individual who wants to hire a domestic worker in your house. For example, a nanny to look after your children or a carer to look after an older relative.

You must register online with HMRC as an employer to do everything correctly and through legal channels. You must also make PAYE and National Insurance contributions to HMRC on behalf of your employee.

Failure to do this correctly (even an accidental mistake) can result in heavy fines or even a criminal conviction. Hence, it is understandable that many employers stress getting this process right and doing everything correctly.

Whilst registering as an employer online is easy enough (it is done through an online portal on the GOV UK website), the next step is what puts many people off. Calculating PAYE tax and deducting it from your employee’s wages week by week or month by month…

What are ‘Basic PAYE Tools’?

GOV.UK provides a tool to help with this burdensome necessity – a basic PAYE Tools software program. It is free and allows you to calculate how much tax you must deduct from your employees’ salaries.

Essential PAYE Tools enable you to input your employees’ salaries onto a system and then work out how much tax and National Insurance you must deduct to send this information to HMRC.

Basic PAYE Tools also has other features which allow you to perform additional functions such as checking the National Insurance number of your employee, sending an Employer Payment Summary, and sending an Earlier year update.

Nevertheless, there are some limitations to using Basic PAYE Tools. For example, it is only designed for small businesses and individuals with less than 10 employees. It does not produce payslips, and some people find it complex and tedious to use.

Furthermore, this is a massive downside: you cannot use Basic PAYE Tools to manage every obligation you have as an employer – it is limited to PAYE and National Insurance only. Your other duties – such as enrolling your employee on a pension plan and taking out liability insurance – must be done separately by you. Another headache!

So what are the alternatives to Basic PAYE Tools?

Well, that depends very much on what your situation is and what your goals are. This software is clearly not for you if you are a large business with more than 10 employees. There are many other third-party software options – free and paid for – which will allow you to manage the tax calculations of a more significant number of employees.

Another alternative is to hire a tax agent for you. A tax agent will manage everything PAYE related for you for a nominal fee. This can be a viable option either for business owners or individuals who hire private staff in their houses. If you do not want to do it yourself, you can hire someone to do it for you.

If you want to hire an employee

However, that does not give the complete picture because when you want to hire an employee, there are other requirements beyond simply paying PAYE and National Insurance contributions, and tax agents may not cover these things. Let’s focus now on individuals who wish to hire a private employee in their home – whether a carer, a nanny, a cleaner, or any other domestic worker.

You can entrust managing PAYE and National Insurance to a tax agent. However, that still leaves the necessity of drawing up a contract for the employee, operating a pension scheme, managing payroll, and issuing payslips.

Nomenial offers a complete package for employers of domestic workers in private households because it offers all of these things. It is much more than simply a tax agent. It is an affordable, complete service that takes care of everything.

The employer contacts Nomenial, provides their details to Nomenial, and Nomenial manages taxes, wages, and all legal technicalities and requirements. Any employer who doesn’t want to deal with the hassle of learning to use Basic PAYE Tools can choose Nomenial as their representative instead.

Nomenial will issue payslips to your employee, enroll them on a pension scheme, calculate and deduct tax, and everything else that causes a headache to employers!

For an individual who wants to become an employer but is intimidated by the legal requirements and is scared of not doing everything correctly, Nomenial is the perfect option because it is a complete package that takes all of the stress out of your hands.

Sign up for Nomenial today.

Learn more about hiring an employee here: