You should report the payment on an FPS in the week that you make the payment. The total amount of PAYE due for these weeks is the amount you should deduct from the total holiday pay.
If your employee will be leaving or retiring straight after their holiday, then work out the PAYE tax due on their holiday pay using the free pay for the week in which you pay it to them. Split the sum up and work out National Insurance contributions on the payment for each week separately. Work out the National Insurance contributions on the whole sum based on the number of weeks it represents.
Round up parts of a week. Work out National Insurance contributions on a 3 week basis by dividing the total earnings on which National Insurance contributions are payable by 3, looking up this figure in the appropriate weekly table and multiplying the National Insurance contributions shown in the table by 3. Do not add the holiday pay to the pay due for working but work out and record National Insurance contributions separately on the pay due for working in the normal way.
If weekly paid employees do not take their holiday until sometime after receiving the pay for it. If payments are due to be paid during a holiday period, the National Insurance contributions due on the payment are dependent on how National Insurance contributions were worked out on the holiday pay for the week in which payment is due to be made.
For example, an employee is due to be paid for overtime worked but because of the payroll arrangements the overtime does not become payable until the employee is on holiday.
If Method A was used to work out National Insurance contributions on the holiday pay, regardless of the week in which the payment is actually made:. However, if the payment is actually made in a different tax year from the one in which it was due to be made, work out National Insurance contributions separately on the payment based on the contribution rates and limits current at the time of payment.
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If Method B was used to work out National Insurance contributions on the holiday pay, and if payment is:. These examples are based on to contribution rates and limits for an employee paying National Insurance contributions under category letter A. National Insurance contributions are worked out using the exact percentage method. On the payday of 20 August, as the overtime payment has already been accounted for, National Insurance contributions are only due on the wages for that week as follows.
Add the overtime payment to the wages and work out National Insurance contributions on the total. National Insurance contributions due are therefore. Wage incentives paid to employers as part of the Youth Contract or Work Choice are subject to normal rules of taxation. A tip or gratuity is an uncalled for and spontaneous payment offered by a customer either in cash, as part of a cheque payment, or as a specific gratuity on a credit or debit card slip.
Where that is not the case, the payment is a compulsory service charge.
PAYE is not due if cash tips are received directly from customers by your employees and are retained by them, and the monies never pass through your hands. Such tips are, however, taxable directly on the employee who should tell us the amounts they have received. Your employees should declare the money to HMRC who will usually adjust their tax code to collect any tax due. If, as an employer, you operate a scheme that pays your employees a share of tips or gratuities including cash tips received by employees and handed to you by the employees for sharing or service charges whether voluntary or mandatory you must include the amount paid to each employee in their gross pay and deduct PAYE accordingly.
A tronc is a separate organised pay arrangement used to distribute tips, gratuities and service charges. The troncmaster is responsible for operating PAYE on all payments made from the tronc, including any share of cash tips. The troncmaster, or someone on their behalf, will need to operate a computerised payroll system and report payroll information to HMRC when or before the payments are made to employees. If you impose a mandatory service charge and the money is paid out to your employees, National Insurance contributions are due on the payments no matter what arrangements are in place to share out the money.
See Booklet E Tips, gratuities service charges and troncs , which explains when National Insurance contributions will be due. Where National Insurance contributions are due, the responsibility for working out and recording the National Insurance contributions will always be yours, as the employer.
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If a troncmaster makes a payment to your employees on which National Insurance contributions are due, make sure you:. The troncmaster should record the amounts on which National Insurance contributions are due separately from any tips or gratuities on which National Insurance contributions are not payable.
It may also be advisable if you take responsibility yourself for paying all earnings to any employee whose basic pay is not enough for full deductions of PAYE and National Insurance contributions to be made. Further guidance can be found at running payroll. Where you decide an employee is involved in a trade dispute but they disagree, advise the employee to contact Jobcentre Plus.
During a trade dispute the procedures that apply in relation to the payments you make to the accounts office are as follows:. You should take the following action in such circumstances:.
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Ordinarily, the earnings period for working out National Insurance contributions is the regular interval between which payments of earnings are made. The following 5 paragraphs describe how to decide what the earnings period is in different circumstances. The rules described in those paragraphs ordinarily do not apply to directors.
Read CA National Insurance for company directors for details on the earnings period to use for directors. If you pay your employees at regular intervals, for example, weekly or monthly, the earnings period for working out National Insurance contributions is that regular interval.
If a payment is not made at regular intervals, there may be a regular pattern covering the period for which each payment is made. In such cases, that regular pattern should be used as the earnings period. If the interval between payments to employees is not regular, and cannot be treated as being regular, the earnings period for working out National Insurance contributions is the period which the payment covers, or one week, whichever is longer.
If either period is less than one week, the earnings period is one week. The earnings period for a payment made before the employment begins or after it ends is one week. As a general rule, if an employee is paid more than one set of regular payments, all payments must be added together and National Insurance contributions worked out using the shorter of the regular intervals between payments.
If an employee receives basic pay on a weekly basis and commission on a monthly basis, National Insurance contributions are worked out on the total pay based on a weekly earnings period. When you first pay an employee, you must work out National Insurance contributions based on what will be the normal earnings period for the employment using the contribution rates and limits current at the actual time of payment. If the interval between an employee starting work and the first payday is less than the normal earnings period, still work out National Insurance contributions using the normal earnings period.
A new employee starts work on 6 October and is due to be paid monthly on the last day of each month.
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The earnings period is monthly and the first payday is 31 October. Work out National Insurance contributions using a monthly earnings period. If the interval between an employee starting work and the first payday spans 2 or more earnings periods, and each period is in the same tax year, work out National Insurance contributions on the amounts due for each of those earnings periods separately using the normal earnings period.
A new employee starts work on 9 June and is due to be paid monthly on the last day of each month. The earnings period is monthly and the first payday is 31 July mistimed payments. If the interval between an employee starting work and the first payday spans 2 or more earnings periods, and the relevant earnings periods are in different tax years, work out National Insurance contributions on the earnings due for each period separately using the normal earnings period.
Use the contribution rates and limits current at the time the earnings are actually paid. A new employee starts work on 10 March and is due to be paid monthly on the last day of each month. The earnings period is monthly and the first payday is 30 April.
If the actual date of payment and the usual payday are in the same tax year, treat the early or late payment as if it had been made at its usual time. In different tax years, work out National Insurance contributions on the early or late payment separately from any other payments made in that tax year, using the contribution rates and limits appropriate to the year in which the payment is actually made. In both the same and different tax years, look at each payment individually and decide which of the above rules applies to that payment. An employee is paid monthly on submission of a timesheet.
The employee submits timesheets for February , March and April during May Work out National Insurance contributions on the payments due for February and March separately using the to contribution rates and limits. Record the National Insurance contributions separately in tax month 2. Work out National Insurance contributions on the payments for April and May separately and record the National Insurance contributions in tax months 1 and 2 respectively.
The methods described for calculation of mistimed payments can only be used when nothing was paid on the usual payday s. This section describes the rules which govern the payment of National Insurance contributions if an employee has more than one job. If an employee has another job or jobs with a different employer or employers, work out National Insurance contributions in the normal way on the earnings you pay the employee. Ignore the payments made to the employee in the other job s.
You may be asked to show why it has not been practicable to add together the earnings from each job. For advice on the type of information we use if we review your decision, read paragraph 3. You can find more information in the National Insurance Manual. Read aggregation of earnings at NIM onwards. An employee may work for 2 or more employers in separate jobs but only get one payment of earnings. If the employers are:. If an employee has 2 or more jobs with you at the same time, the general rule is that you must add all the earnings together and work out National Insurance contributions on the total.
For example, this might be if you operate a computerised payroll system which is unable to perform the separate calculation and you would then have to do it manually.
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In such cases, you may be required to show why it has not been reasonably practicable to add the earnings together from each job. We rely upon the ordinary dictionary meaning and any relevant court decisions.