Payroll Frequently Asked Questions ...

Q : What do I do if ... I employ someone?

A :
- Give the employee an "Employee Details Form" to complete
- Ask for the Employees P45 from their previous employer.
- Forward both Employee Details Form and P45 to RMD Accountancy Solutions for processing.

Q : What is ... a P45 Form ?

A :
A P45 form is a document which is issued to an employee on leaving their employment. The form details the employee's taxable earnings to date where appropriate and the tax code / basis previously operated.

The employee should then give this form to their new employer / RMD Accountancy Solutions in time for their first pay to be calculated.

A new employer / RMD Accountancy Solutions will then process the P45 Form based on the information detailed and the employees earnings will continue to be taxed at the appropriate level.

Q : What do I do if….. An employee doesn't have a P45 from their previous employer?

A :
- Give the employee a P46 form to complete.
- Forward the completed form to RMD Accountancy Solutions for processing.

Q : What is ... a P46 Form ?

A :
A P46 Form is a declaration to HM Revenue & Customs which an employee can complete if he/she does not have a P45 Form when they start work for a new employmer and confirms the employee's employment status at the point of completing the form.

The form is used to both advise HMRC that a specific employee has now been employed by a specific employer and also enables the employer/ payroll department to determine which tax code to operate until HMRC advise of any alternative.

A P46 Form looks this this > click here <


Q : What is ... a tax code ?

A :
A tax code is a code which indicates the level of tax free allowance / pay an individual is entitled to in any tax year. Once an individual's pay exceeds their tax free allowance for the year tax is then paid / applicable at the appropriate rate for the balance of the earnings exceeding the tax free allowance.

In terms of payroll processing the tax free allowances are pro-rated to the tax week / month for which the payroll is being calculated and so an individual's earnings may exceed the tax free allowances each week / month and tax becoming payable accordingly. The typically evens an employee's pay out over the year so that if an regular gross pay is being received then similarly a regular net pay can be expected enabling the employee to budget.

Q : What does ... a tax code's basis mean ?

A :
A tax code can be either operated on a Cumulative Basis or on a Week 1 / Month 1 Basis. This has the following effects on the tax calculated within a payroll run.

Cumulative Basis -
Tax codes on a Cumulative Basis enable previous earnings history and tax already paid to be taken in to account when calculating the tax on each payroll run. If an employee has overpaid tax in a previous employment or in the current employment the
employee's earnings have significantly dropped then the over paid tax will be refunded via the payroll when it is run. Equally though if an employee has not paid enough tax any underpaid tax would be recovered if the employee's tax code was on a cumulative basis.

Week 1 / Month 1 Basis -
If a tax code is operated on a Week 1 / Month 1 basis then the payroll will not take any other earnings history or tax paid into account and therefore refunds will cannot be generated via the payroll.
Only the current earnings for the period being processed are used to calculate the level of tax due to be paid.

Q : What is ... gross pay ?

A :
Gross pay is the total payments an employee is entitled to over a specific period. This may contain payments for hours worked, overtime, bonuses, expenses, allowances etc...

Q : What is ... Taxable Pay ?

A :
Taxable pay is the total payments an employee is entitled to over a specific period on which tax is payable.

It should be noted that all payments an employee may be taxable

Q : What is ... Net Pay ?

A :
Net pay is the amount which an employee receives, often referred to as "Take Home Pay".
Net pay is the resultant pay after tax, national insurance, pension contributions and voluntary contributions have been deducted.

Q : What do I do if….. An employee is sick?

A :
- Ask the employee to complete a Self Certification Form (SC2) - This form covers employees for up to 7 days of a new period of sickness.
- If the employee if off for 7+ days the employee needs to submit a doctors note to enable SSP eligibility and payments to be determined.

Q : What do if do if… an employee tells me she is pregnant?

A :
- Ask for her MAT B1 form from the doctor/midwife.

A MAT B1 details when the baby is due and actual confirmation of pregnancy.

Q : What do I do if…. An employee asks for time off to attend to paternal issues.

A :
- New parents are entitled to 2 weeks paid leave called Statutory Paternity Leave (SPP)
- Leave must be taken in whole weeks
- Is subject to the employees level of earnings / eligibility conditions.

Q : What do I do if…. An employee uses their car for business travel?

A :
The employee can be reimbursed at a rate of 0.40p for their first 10,000 miles and then 0.25p for 10,000+ miles without incurring a tax liability (tax + NI free).


Q : What do I do if…. An employee is given a company car?

A :
A company car is a taxable benefit and therefore the employee incurs a tax liability and the employer incurs NIC class IA (?) liability.

- Form P46 Car needs to be completed detailing the make, model, emissions (?) of the vehicle together with the employees details NINO etc.
- The form is then sent to the Inland Revenue for processing. The Inland revenue will then issue a revised Tax Code for the employee concerned.
- Petrol P46 Car / Tax Code Change Notification to RMD.

Q : What is ... the Employer Payslip Booklet (P30BC) ?

A :
The Employers Payslip Booklet is used to make payments of PAYE over to HM Revenue & Customs.

Q : What do I do to…. Complete the yellow PAYE Payments booklet?

A :

At the front of the payments booklet there is a space to calculate the Net Tax + NIC's due.

+ = Add
- = Subtract

1. TAX :
= Gross Tax
+ Student Loan Deductions
= Net Tax

2. NIC :
= Gross NIC
- Statutory Maternity Pay (SMP) - Recovered
- Statutory Sick Pay (SSP) - Recovered
- Statutory Paternity Pay (SPP) - Recovered
- Statutory Adoption Pay (SAP) - Recovered
- NI Compensation on SMP
- NI Compensation on SAP
= Net NIC's

3. Total PAYE to pay :
The total PAYE due is calculated by adding the NET TAX + NET NICs the total of which is then entered onto the payment slip.


Q : Where do I .... post payments made in respect of the payroll to the accounts ?

A :
Payments paid out for the following :-

- Net Pay
- Pensions
- Attachment of Earning Orders

Are all posted to the same nominal account that the liability was posted to within the accounts. Once all the payments have been made the liability accounts should either balance off to zero or carry a balance of payments still awaiting to be paid out - this may be the case if you have a weekly payroll and payroll journals are being posted more regularly and a reconciliation to the outstanding balances would be required.