Unpaid Payroll Taxes and What This Means for your Business

As an employer, it’s essential that you comply with certain tax obligations every month. For example, an employer is responsible for withholding deductions for PAYE from employees’ wages for HMRC – deductions such as tax, National Insurance, pension payments and any loans to be repaid e.g student loans. 

Calculating these deductions, making payments to HMRC and creating payslips are all part of an employer’s obligation to its payroll and employees. Naturally, these are all time-sensitive actions and if deductions are not calculated accurately then there can be costly effects further down the line.

Payroll Tax Responsibilities

It’s your business’ responsibility to make sure that payroll taxes are paid properly, accurately and on time. A payslip is a tangible way to demonstrate that these deductions have been made with the break-down of deductions stated on them. Think of them like a piece of evidence to show that your business has carried out its obligations.

Different employment statuses can affect responsibilities. For example, when employees are fulltime, taxes are delivered through payroll. But if anyone that carries out work for you is registered as self-employed then they’ll pay their own taxes and contributions (National Insurance) via their self-assessment form that they submit themselves. The responsibility for PAYE taxes is their own and not your business’. 

Understanding the employee status of individuals is crucial for you to plan tax appropriately, as well as ensuring that your employees understand their own status e.g someone who is not familiar with the UK tax system.

Non-payments can result in defaults being added to the record of your business, which can lead to financial penalties which can be unnecessarily costly for your business.

Unpaid Tax Roll

What happens if there are unpaid payroll taxes? Company directors of a business that’s a limited company have certain protections against the failure of a business through limited liability, but a company director can be liable when there is non-payment over taxes, especially if it is found to be neglectful conduct by HMRC.

If payments are late or incorrect then financial penalties can be incurred and the longer a balance remains unpaid then the penalty will accumulate. If PAYE amounts aren’t paid or are not paid on time then HMRC will issue penalties. In the first instance, a late repayment can be forgiven but anything else will trigger defaults and the number of defaults on the record of your business will result in the penalty rate. A payroll penalty should be paid within 30 days. If a business takes 6 months to pay a penalty then a further 5% will be added to the penalty, likewise after 12 months. 

Adhering to regulations, obligations and complying with payroll taxes can be daunting, especially for a new business. Ensuring that you avoid costly penalties is crucial and working with payroll experts like APS Global can give you the confidence that your payroll is completed in a timely and accurate way, leaving you to excel in every other area of your business. Get in touch today.

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