What is payroll?

Definition of payroll

Payroll is the process of calculating how much to pay your employees.

You will 'Run your payroll' regularly, perhaps once a week or once a month, when you employ staff. You'll work out how much your staff are due in salary, starting with their pay before tax as agreed with each employee, then deducting Income Tax and employee's National Insurance, and any other deductions such as student loans. You then pay the remainder to the employee.

Most employers run payroll through software, such as FreeAgent.

As an employer you must also pay anything you've kept back from your employees' salaries to the relevant parties, for example tax and NI must be paid to HMRC, and pension contributions to the pension provider.

You then have to report to HMRC: * who you've paid * when you paid them * how much you have paid them * how much you've deducted from their wages and for what purpose

You must report this information electronically, on or before the day you pay your employees. This is called RTI (Real Time Information).

Reporting payroll to HMRC

FreeAgent's payroll features are included in its accounting package. No need to import numbers from another system, you can simply run your payroll and file your PAYE and NI to HMRC in real time and your books update automatically.

Got questions? Ask Emily!

FreeAgent's Chief Accountant Emily Coltman is available to answer your questions in the comments.

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