You need to set up a Pay As You Earn (PAYE) system if you have employees, or if you are a limited company (as you are counted as an employee). Make sure you've registered as an employer with HMRC before you set it up.
What is PAYE?
- PAYE is the system used for deducting tax and National Insurance Contributions (NICs) from your employees' wages to pay to HMRC.
- You have to deduct income tax for all employees earning more than £7,475 a year in tax year 2010/11.
- You have to deduct NICs for all employees aged 16 years or over and under state pension age who earn more than £110 a week in tax year 2010/11.
- You apply PAYE to all wages, all payments made in cash (including expenses payments made in cash) and some benefits in kind