Setting up Payroll

1. Create payroll profiles

Payroll Profiles contain all of the information about an individual's monthly pay, deductions, pension contributions and the starting/leaving dates required to file your payroll online with HMRC.

From the 'My Money' menu choose 'Payroll', then select the tax year 2013/14.
If you have a Sole trader, Partnership or LLP FreeAgent account, 'Payroll' will only be available if you've added any employees as users in your account.

Next, select an employee. If you haven’t already set up a payroll profile for the employee you'll see a payment profile explanation – select 'Create Payroll Profile'.
If you're a company director, and the company pays you a salary, you also need to set up your own payment profile.

Complete the payroll profile for the employee using the following sections:

Employee Details

Enter personal details for the employee including their 'National Insurance Number'. You only need to enter a 'Passport Number' if you've collected this as part of any checks you've made as to whether the employee is entitled to work in the UK.

Some information will already have been filled in by FreeAgent because you've already entered it in the employee's user profile.

Partner's Details

Enter partner's details if the employee is claiming or planning to claim Additional Statutory Paternity Pay.

Employment Details

Select if this person is an existing employee or a new employee and then select from the 'NICs calculated as' director or employee options.
National Insurance contributions are usually calculated as equal monthly payments. Directors have the option to choose to pay their National Insurance cumulatively, so that they pay less at the start of the tax year and more at the end. If you want to use this option for this individual, select the 'Director' option.

For new employees enter a start date and whether or not they are paid irregularly. You also need to select from the HMRC ‘Starting Declaration’ options which provides information about any other work the employee has untaken or benefits received during the current tax year.
Information about a new employee will be sent to HMRC as part of your next RTI submission after you create their payroll profile.

Select an option from ‘Normal Weekly Hours’ to indicate how many hours a week the employee will work for the business. You can also add an optional unique employee number if you'd like HMRC to use this any correspondence with you.

Tax & NI

Enter a tax code. You should have already received this from HMRC or will find it on the employee's P45.
Tax code should only be changed on receipt of a coding notice from HMRC. FreeAgent can handle BR, D0 (D-zero), D1 (D-one), K prefixes (like K495) or L, P, Y or T suffixes (like 810L).

Select a 'National Insurance Category Letter' – this is also sometimes known as the National Insurance contribution letter and is the same as the NIC Table Letter shown on a P60.

If the employee should be making Student Loan payments, select yes from 'Are there applicable Student Loan Deductions?'.

Leaving Date

You don't need to add a leaving date when first setting up a payment profile. This is where to add a leaving date if the employee leaves the company in the future.

Monthly Pay

Enter details of the employee's monthly/basic pay with any allowances or other payments.

Monthly Statutory Pay

Enter any other pay the employee is currently receiving such as sick, paternity or maternity payments.

Monthly Deductions

Add any regular monthly deductions.

Monthly Pension Contributions

Add details of any employer or employer monthly pension contributions.

When you're ready, 'Create payment profile' to save the new payroll profile.

2. Prepare a monthly payroll

Once you've set up at least one payment profile you will see the option to 'Prepare Month 1 Payroll'. This will take you to a payroll preview.

• Choose a date for your pay period - This is the date that the company is going to pay its employees. HMRC requires that the RTI submission is made before or on this date.
• Review and edit payslips to make any adjustments for the current month's payroll. Any changes made here will not affect your default payment profile settings.
• Double-check everything - Check that you’ve made any necessary changes to your payroll profiles such as adding employee leaving dates, making changes to tax codes or updating student loan settings.

When you’ve completed your checks select 'Run & Report Month 1 Payroll' to continue.

3. Submit your payroll to HMRC (RTI)

Once you select 'Run & Report Month 1 Payroll' you have effectively run your payroll, and payslips for the month have been created. You now need to submit your PAYE information to HMRC by entering your Government Gateway login details when prompted.
Payroll Real Time Information (RTI) submissions will be available in FreeAgent from April 2013. If you run your 'Month 1 Payroll' before April 2013 you'll be reminded to check back and report this information to HMRC when RTI comes into effect.