Taking on an Employee for first time - under Lower Earning Limit

[Newbie2011]

I am about to take on a part time member of staff, they are on minimum wage of 5.93per hour and do 16hours a week.
They are under the Lower Earnings Limit for National Insurance and Tax from what I can understand, being my first employee, do I need to register them with HRMC or do anything with regards to PAYE?

They will be claiming tax credits for the 16hrs a week, do i need to do anything to register or support there claim for that?

Also when I do my tax return, do i put the wage I pay to them as an Expense and claim it back? :|

Many thanks in advance.

 

[amanda1112]

Employees wages are paid from the profits of the business. As far as I am aware you can't claim money back on profit made or wages to employees. You will definitely need to register an employee with the HMRC. They will send you all of the information you need to set up an employee. Alternatively you could ask an accountant to do the payroll for you who will provide you with wage slips.

 

[elaine@cheapaccounting]

Employees wages are paid from the profits of the business. As far as I am aware you can't claim money back on profit made or wages to employees. You will definitely need to register an employee with the HMRC. They will send you all of the information you need to set up an employee. Alternatively you could ask an accountant to do the payroll for you who will provide you with wage slips.

with respect - what???

You do not need to register if you pay someone under the LEL - see here for info:

Employers' responsibility for PAYE

As an employer you have a legal obligation to operate PAYE on the payments you make to your employees if their earnings reach the National Insurance Lower Earnings Limit (LEL). For the tax year 2010-11 this is £97 a week, £421 a month or £5,044 a year.

http://www.hmrc.gov.uk/paye/intro/basics.htm

 

[elaine@cheapaccounting]

And yes wages are an allowable expense for tax purposes

 

[MyAccountantOnline]

Just to add to what Elaine has said here's another link for you - it explains when you need to register with HMRC as an employer.

 

[MyAccountantOnline]

Employees wages are paid from the profits of the business. As far as I am aware you can't claim money back on profit made or wages to employees.

Maybe you are thinking of a soletraders drawings? These arent allowable for tax purposes - people often in error call these wages?

Staff wages are an allowable expense.

 

[DeanCo]

If your employee is under the LEL threshold you still need to register as an employer if the employee has another job or have a state or private pension.

 

[amanda1112]

Maybe you are thinking of a soletraders drawings? These arent allowable for tax purposes - people often in error call these wages?

Staff wages are an allowable expense.

Yes I was referring to a sole trader taking on an employee

 

[elaine@cheapaccounting]

The wages of an employee are allowable - the wages of the sole trader are not and as known as drawings

 

[David A]

Yes I was referring to a sole trader taking on an employee

Be very wary of taking on any employee as a sole trader.

Should any employee (or ex-employee) take and action with an Employment Tribunal and wins, the award can be so severe that it could bankrupt you.

My advice is to only employ someone within a limited company, and that this company has very little in the way of assets. The company then bills the sole trader for employment services.

Taking on an employee is that single biggest decision that a business owner will ever make. BE VERY CAREFUL and PLAN for the WORST and HOPE for the BEST.