PAYE/NI for payroll giving

koru

Has anyone worked out how to do PAYE and NI if you are doing payroll giving?

My company currently pays me once a year, so that I only need to pay PAYE and NI to the taxman once a year. But as I want to do payroll giving I now need to pay myself monthly. I want to do donations of £10 per month, so can I just pay myself £10 salary per month? After deducting the £10, that means I have no taxable salary, so presumably no PAYE to pay. Does it work the same for NI?

computerbar

simple answer
YES! If you do it that way.

Your £10 could be worth more to them. It is called GIVE AS YOU EARN (GAYE).

Check this link to get an idea what I meant by that.
http://www.cafonline.co.uk/default.aspx?page=7035

koru

Thanks. CAF is exactly what I am doing. I just wasn't sure if your taxable income for NI purposes is the same as for income tax purposes.

computerbar

Hi again

there is also some info on this site about GAYE, worth reading too.
http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1064193192,2757,#payroll

Savvy_Sue

koru wrote:

My company currently pays me once a year, so that I only need to pay PAYE and NI to the taxman once a year.

I'm a bit confused by this bit ... don't think I have EVER heard of someone only being paid once a year! Is this paying you as a Director? Because if not, and you're on PAYE, why would YOU be paying anything anyway? It's your employer's problem, not yours.

How often you're paid shouldn't make any different to how much Income Tax is due, but may well make a difference to how much NI you pay, and the difference would usually be to your DISadvantage, IMO.

Because NI is calculated on what you are paid IN THAT PERIOD. And if your earnings are below a certain level IN THAT PERIOD, you pay no NI.

I think the level below which you don't have to pay any NI is roughly £90 per week.

So, if you usually earn £80 per week, then you won't pay any NI. But if you do double hours one week, you WILL pay NI. Or if you get some back pay, or something like that, then the NI comes off.

Now, if your employer pays you 52 x £80, once year, you will pay a BIG WHACK of NI, whereas if you'd been paid every week, you'd have paid none.

I'm stating the 'normal' position: it may be quite different for director's contributions, I guess, if these are based on your annual income then it may not be so critical.

Anyway, the other thing is that although GAYE is good, there is also Gift Aid, which has some advantages for the charities you're supporting.

koru

I am the director, the shareholder, the employee and the payroll clerk of the company, so "I" can mean any of those things, which is admitedly confusing. The company pays me a salary and the rest of the profits come out as dividends. I do the company's PAYE and NI returns, so the company only pays me once a year, so that I only have the hassle of working out PAYE and NI once a year. The first 11 months of the year, I submit nil PAYE returns (ie, returns showing nil payable), which makes life a touch easier.

This doesn't save any PAYE or NI, because this is worked out on the basis of dividing the annual salary by 12, working out the PAYE and NI and then multiplying that by 12, so the company pays the same as if the salary had been spread over the year. The benefit is it cuts down the hassle. I understand (from the HMRC employers helpline) that this is a pretty common procedure for companies like mine.

Initially, I assumed that in order to do GAYE and get the matching donations from the government, I would have to start doing full calculations each month. But then I realised that if I pay myself £10 a month and deduct £10 GAYE, I would still be able to make nil returns. Unless anyone knows different.