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Contractor PAYE Update

Matters affecting contractors from latest HMRC Employer Bulletin

A number of PAYE matters affecting contractors are detailed in the recent Employer Bulletin.

Employment Allowance

PSC’s and MSC’s are able to reduce their employers NIC by up to £2,000 for each tax year but only against employers NIC arising on employees earnings. The allowance cannot be offset against any deemed payments, i.e. the operation of IR35.

It is, according to HMRC, straightforward and easy to claim. Contractors can use their own 2014/15 payroll software or HMRC’s Basic PAYE Tools to claim the allowance.

When making the claim, you must reduce your employer Class 1 NIC payments by an amount equal to the NIC due, but not more than £2,000 p.a.

A company’s monthly employers NIC is £1,200.

Employment Allowance2,000
Less:  April employers NIC  (1,200)
c/f and used against May NIC800

By May therefore the allowance is fully exhausted.

Freelancers can see how much of the Employment Allowance they have used in ‘View PAYE Liabilities and Payments’ in HMRC’s Online Service.

Once the claim for the Employment Allowance is made, HMRC will automatically carry the claim forward each tax year. It is important therefore that at the beginning of each tax year employers check that their circumstances haven’t changed.

More information can be found by visiting Employment Allowance: up to £2,000 off your Class 1 NICs.

Final PAYE submissions y/e 05.04.14

Most contractors may have made their final PAYE submissions for 2013/14 but don’t forget that relevant employees must be given their form P60 by 31st May.  

For those making a final submission by way of an Employer Payment Summary (FPS) don’t forget to:

  • Confirm that it is your final submission for the tax year;
  • Answer the additional questions and complete the declaration; and
  • send it to HMRC by 19th April.

Guidance on ‘PAYE final submission for the year end and end-of-year tasks

Interest charges from April 2014

HMRC will charge interest on any payments not made by the due date and will be charged daily rather than annually. This will apply to:

  • PAYE, including specified charges
  • CIS charges
  • Late payment penalties
  • Late filing penalties
  • Class 1A NIC charges

More information can be found at

HMRC’s Basic PAYE Tools

The 2014/15 version of Basic PAYE Tools will be provided as an update to the existing version rather than a separate download meaning that employers will not need to transfer their database as in previous years.

In July or August of this year, some new functionality will be provided to employers using Basic PAYE Tools. It is essential that this upgrade be taken when it is made available. To ensure that you are prompted when the update is released you should:

  • Open Basic PAYE Tools and from the Home page follow the ‘Settings’ link;
  • Set ‘Yes’ to ‘Automatic update?’;
  • Scroll to the bottom of the screen and select ‘Save’.

HMRC’s online services

HMRC will be piloting three new digital services to a small group of taxpayers, which will be gradually rolled out during the year.

(1)  Your tax account

This will make it easier, quicker and simpler for businesses to deal with HMRC online. One can only hope so!

(2)  Digital Self Assessment

An improved service for those in the Self Assessment system which will allow individuals to receive e-mail alerts and view messages from HMRC online through a secure, personalised portal.

(3)  PAYE for Employees

A new digital service that will mean employees can inform HMRC about changes to their car and car fuel benefits that affect their coding for the first time.

‘Your tax account’

For the first time, ‘Your tax account’ will bring together, on a new personalised homepage screen, access to HMRC online services and information for Self Assessment, VAT, Corporation Tax and PAYE for employers. It will present a clear summary of the taxpayer’s tax position (liabilities and payments made) and links to key functions and help needed to manage their business tax affairs.

‘Your tax account’ will replace the current ‘Your HMRC services’ page for those who move over to it. For Self Assessment taxpayers it will also provide access to the Digital Self Assessment service.

By Andy Vessey


Add a comment

1 thought on “Contractor PAYE Update”

  1. Daniel

    For final submissions via FPS don’t forget to what?

    Always useful to post a half finished article. Copy and paste error?

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