You’ve hired someone to work in your home, maybe a housekeeper, carer, or gardener. Congratulations! You’re now officially an employer.
Being an employer comes with some legal responsibilities, like running payroll. This means paying your employee correctly, issuing payslips, and letting HMRC know what’s what, and, yes, you can absolutely do it yourself.
Here’s a handy guide to what’s involved in DIY payroll, so you can decide if it’s right for you. Let’s break it down step by step.
Step 1: Register with HMRC
First, you tell HMRC you’re an employer. This gets you all the codes and references you’ll need. It’s a bit of online form-filling, but once it’s done, it’s done. You’re official.
Step 2: Use HMRC’s Basic PAYE Tools
This is the free software you’ll use to:
- Calculate pay
- Work out tax and National Insurance
- Submit Real Time Information (RTI)
- Create payslips
Sounds straightforward, right? Well… mostly. The tool is fully functional, but not particularly intuitive to use (and occasionally confusing).
Step 3: Submit RTI, Every Payday
Real Time Information (RTI) is HMRC’s way of tracking payroll. You’ll submit something called an FPS (Full Payment Submission) on, or before, the day you pay your employee.
Missed the deadline? You may get a fine. Enter the numbers slightly wrong? That could affect your employee’s tax. Because of this, we advise double-checking all your information before you press the “submit” button.
Step 4: Keep Your Records
HMRC will expect you to keep records of:
- Payslips
- Payment records
- Tax calculations
Basically, receipts for everything. Digital or paper, it doesn’t matter. But they need to be tidy, accurate, and ready to share if HMRC ever asks to see them.
Step 5: Stay Up to Date
The new tax year rolls around in April, and this is when HMRC can make changes to elements like tax bands, national Insurance rates, student loan thresholds, minimum wage and so on. You’ll need to be on top of this, which means keeping up-to-date with the budget news, reading updates from HMRC, and tweaking your payroll accordingly.
Is DIY Payroll The Right Choice For You?
DIY payroll can work brilliantly if:
- You have one employee
- Their hours and pay stay the same
- You’re organised and enjoy detailed work
- You feel comfortable with spreadsheets and government websites
If that sounds like you, amazing! Happy (pay)days!
When To Choose Expert Help
Let’s say your employee’s pay changes, or they go on sick leave, or their tax code changes mid-year. When this happens, the calculations can become more complex.
And what if you submit something incorrectly? You’ll likely get a letter from HMRC, and a to do list of tasks to put things right for your employee.
Payroll providers, like us friendly folks here at Stafftax, are experts in managing this for you. We make the submissions. Create the payslips. Deal with HMRC. Keep up with changes in tax and employment law, and we can offer support with HR advice too. If you want the peace of mind that everything is covered, and you are legally compliant, choosing a payroll provider can be a fantastic investment.
Final Thoughts
Running your own payroll is very do-able, and if you enjoy admin, or just like being in control, it can even be satisfying.
But if your time is limited, your enthusiasm for spreadsheets is minimal, or you just want to know its being done right, then outsourcing to a company like Stafftax will save you time and give you peace of mind.
