05 Oct 3 payroll mistakes to avoid
Payroll might seem like a straightforward process, but there are a number of common mistakes that can lead to unexpected costs and wasted time. In this blog, we’ve put together a list of three payroll mistakes to avoid.
Most small business owners are incredibly busy, so it can be difficult to keep on top of all of your responsibilities. However, it’s essential to make sure that you have an efficient payroll system in place to prevent costly mistakes and unhappy employees. If you rush through the payroll process, you could end up overpaying or underpaying an employee which can lead to fines and time wasted spent correcting your mistakes. Outsourcing your payroll services is a great way of making sure that all of your payroll processes are dealt with on time without errors.
Not record keeping
Whether you’re a small business or a larger company, you’ll likely dread hearing the word ‘audit’. If, for whatever reason, you need to go through an audit, meticulous business records will help you significantly, especially payroll records. It’s essential for you to make sure that you keep your payroll records for a minimum of three years from the end of the tax year they are associated with, or you could be required to pay a penalty charge of up to £3000. Keep detailed records of everything you pay your employees as well as any deductions, tax code notices, employee absences and taxable expenses.
Not declaring personal bills as earnings
Any personal bills incurred by directors and employees (such as utility bills or credit card payments) that are paid by the employer will usually be liable to tax. The tax treatment will vary depending on how the payment is made and who the contract is with, so if there is a contract between the supplier and the employee, the employee will be required to pay the bill but will ultimately be reimbursed by their employer. In this case, the full cost will be regarded as salary for tax purposes, so this needs to appear on the payroll.
If you’re in need of payroll support for your small business, get in touch with our team at SQK Accountancy today.