Tax Considerations

Q. What tax considerations are involved with employing a workforce in the UK?

A. All employees in the UK are subject to Income Tax and National Insurance Contributions so an employer is required to operate Pay As You Earn (PAYE) as part of their payroll.

PAYE

This is HMRC’s system to collect Income Tax and National Insurance, meaning that it is deducted from the employee’s gross pay before reaching the employee themselves.

Moore Kingston Smith can operate your PAYE through its payroll system. Alternatively, you would need to choose your payroll system to record details, calculate pay and deductions and report to HMRC monthly under the Real Time Information regime

National Insurance Contributions (NIC)

NIC is essentially a tax on earnings.

Employers currently pay NIC at the rate of 13.8% of employees’ gross salary above £8,788 per year, whilst employees pay additional NIC at a rate of 12% of salaries between £9,516 and £50,000 and 2% on all earnings above that. Meanwhile, self-employed individuals are liable to lower rate NICs.

The Government has introduced an allowance of £4,000 per year that some businesses can offset against their employer’s NIC liability.

Expatriate tax (if applicable)

Expatriate tax is an area where advice must be sought well in advance of an employee coming to or leaving the UK as, often, steps must be taken prior to arrival or departure to ensure that opportunities to claim deductible living expenses, exemptions from National Insurance and relief for non-UK work days are not missed, and to ensure that the employer’s PAYE and NIC obligations are met as appropriate.