If you employ staff, you will have to process PAYE as part of your payroll. This system allows HMRC to collect all Income Tax and National Insurance from your employees. In addition to tax and National Insurance contributions, you may need to make other deductions such as student loans, pension payments or childcare voucher payments.
PAYE payments will normally be made to HMRC on a monthly basis, these payments can impact your cash flow. However depending on the size of the payroll it may be possible to pay PAYE contributions quarterly instead of monthly. Employers who, over the course of a tax year, expect their average monthly PAYE payment will be less than £1,500 (less than £18,000 for the full tax year) can make PAYE payments quarterly.
The total that HMRC uses to calculate this threshold includes Income Tax, National Insurance contributions, Student Loan deductions and Construction Industry Scheme (CIS) deductions.
The quarterly payment system can offer considerable cash flow advantages to smaller businesses and also startups employing one or two people initially.