New way to pay payroll taxes
Pay by DD. Following feedback on its existing system, HMRC launched its “variable payment plan” for PAYE and other taxes on 19 September 2022. It’s a voluntary service for employers that allows HMRC to collect variable payroll taxes by direct debit (DD) without a fresh instruction.
Taxes covered. Broadly, any taxes, levies etc. that you report to HMRC online as part of your payroll process are covered. In addition to PAYE tax this means NI contributions, including Class 1A payable on benefits in kind, construction industry scheme deductions and the apprenticeship levy.
Reports covered. The DDs will reflect PAYE etc. liabilities shown on your full payment submissions, employer payment summaries and earlier year updates . Your Class 1A NI liability, if any, will be taken into account when you submit your benefits and expenses annual declaration (due by 6 July following the end of each tax year).
Frequent paydays. The DD will be taken monthly on the 23rd, or if that’s a not a banking day, the next day. If you submit more than one report in a tax month, say because you have weekly paid workers, the DD will match all liabilities for the month. HMRC has promised that the amount it will collect will never exceed the total of tax etc. shown by your reports.
Pros and cons. The new arrangement simplifies the payment process and prevents inadvertent late payments (provided you have sufficient funds to cover the DD), which would result in interest and penalties. A drawback is that HMRC is prone to mistakes. If it makes an error the wrong amount could be collected from your bank account.
Tip. You can check the DD amount up to three days before it’s taken. This should give you just enough time to sort out the error with HMRC and cancel the DD (see The next step ).
For how to set up a variable payment plan, visit https://www.tips-and-advice.co.uk , Download Zone, year 22 issue 22.
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