I get asked this a lot and I will try to keep my response simple. If you employ staff (including yourself) to help run your business, you might need to register as an employer with the HMRC.
Note that limited companies, whether one man bands or not, are employers as at the very least the owner is an employee of the company. On the other hand, sole traders only normally become employers when they employ additional people to work for them.
Please be aware that this post is not about whether you should be an employer, it is about whether you should register as an employer with the HMRC. The guidelines regarding registration are quite clear.
When do you need to register?
You need to register when or if any of the following is true:
1. you are paying anyone at or above the PAYE threshold
2. you are paying anyone at or above the NI Lower Earnings Limit threshold
3. the employee has another job
4. the employee is receiving any state, company or occupational pension
5. you are providing them with employee benefits
So what are these thresholds you speak of?
The thresholds mentioned above are provided annually and can be found on the HMRC’s website. They are what you are allowed to earn tax-free and/or NI (employee)-free. The 2013 – 2014 figures are
– PAYE tax threshold: £182 per week or £787 per month or £9440 per annum
– NI Lower Earnings Limit: £109 per week or £476 per month or £5668 per year
Don’t be tempted to pay your staff below the thresholds!
Be aware that the National Minimum Wage is in operation. The following minimum payments apply from 01 October to 30 September 2014:
Aged 21 and above: £6.31 per hour
Aged 18 to 20: £5.03 per hour
Aged under 18: £3.72 per hour
Apprentices aged under 19: £2.68 per hour
Apprentices aged 19 and over in the first year of their apprenticeship: £2.68 per hour