When you’re dealing with taxes it’s really important that things don’t go wrong. If taxes are filed incorrectly you can face serious repercussions.
With our help, we are going to give you a few hints and tips on how you can stay on top of your employee taxes and ensure everything is filed without a hitch.
Double-check your information
If you’re using an electronic system to input data, you shouldn’t ever trust the system completely and instead should check (and check again) that all of the information is correct.
One wrong digit can cause so many problems. It can see an employee getting taxed much more or less than they should – and that can have serious consequences.
File documents accordingly
When it comes to handling employee taxes – or taxes in general – you will need to stay organised. One way to do this is to have a filing system for important documents.
Documents and forms you will need to store and keep include:
- Details of employee pay is and the deductions made
- Any employee leave and sickness
- Tax code notices
- Any taxable expenses or benefits.
These aren’t the only forms that you should file, so be sure to check every document before you dispose of it.
Organise annual reporting
When the tax year is up, you will have some tasks you need to complete, the first one is to report to the tax office on the previous tax year. You will then need to ensure all of your employees receive their P60 (the US refers to this as a W-2 form). You will then need to prepare for the next tax year.
As a timeline:
- On or before your employees’ final payday of the tax year you should send your final payroll report of the year
- Then you will need to update your employee payroll records (here is where you will need to confirm the correct tax code for the new tax year and enter their code into the software)
- Update payroll software (follow the provider’s instructions to update this so it is running all of the essential features)
- Give employees their P60
- Report employee expenses and benefits.
Understand who your taxable employees are
You will need to get an understanding of your employees’ tax codes and know who should be taxed and for how much. For new employees, you can work out their tax code from their P45 and you will need to update this at the start of the new tax year.
The numbers in the tax code determine how much income they can get tax-free in that year (the numbers are multiplied by 10 to get the figure). For example, if the tax code is 1250L, they can earn £12,500 before they are taxed.
You’ll discover a range of letters which can mean different things in the tax code, so it may be beneficial to understand those.
Taxes can land you in hot water if they are not completed correctly, but by taking the time to check information, you shouldn’t have any problems.