⚠️ Our Disability Tax Guide guidance has moved to the LITRG website. If you have a query about any of the issues we cover in this section, please let us know by filling in the Contact Us form.
Taking on an employee
Once you have made the decision that taking someone on is the next step for you or your business, there are some important issues that you must think about. This section will help you understand whether you are an employer, and if so, what you have to do.
Whether you are a busy family taking on a nanny or a successful tradesman taking on a labourer, the thought of becoming an employer might be daunting. This section is dedicated to providing information and guidance about key areas that you need to consider, to ensure that you meet your responsibilities and obligations as someone’s employer.
First you need to check that you will definitely be an employer. This will be the case if your worker is classed as an employee for tax purposes and not self-employed. We explain more about this in our tax status section.
As a first-time employer, one of the main things you probably need to do is register with HMRC so that a PAYE system can be set up. The main purpose of the PAYE system is for employers to collect tax and National Insurance (NIC) from their employees’ wages on behalf of HMRC and this is done as part of running a 'payroll’. We explain more in our setting things up section.
What other information can I find in this section of the website?
In this section, you will find more information about:
How the PAYE system works: including a look at the Employment Allowance and tax codes
Taking on a new employee: gathering the information you need to set someone up on your payroll
Real Time Information: information on the 'Real Time Information' (RTI) reporting system when filing online and also in relation to the limited circumstances in which you can file on paper
Pay and deductions: what counts as pay and what deductions can you make? Including your minimum wage and auto enrolment pension obligations
Ongoing payroll tasks: as well as running your payroll and submitting RTI information to HMRC, you need to pay your employee and give them a payslip, and pay HMRC regularly.
End of year processes: how to finalise your payroll each year and report any benefits and expenses you provide
Employee leaving: what to do if your employee leaves your employment
Employment law: if you are taking someone on you need to be aware of your employment law responsibilities
Keeping records: one of the most important aspects of being an employer
Getting things wrong: including what happens if you treat your employee as self-employed incorrectly
Getting more help: there is lots of help available for new employers
If you are considering offering a person work experience or someone is volunteering for you or your organisation (for example, because it is a charitable one), then there is some guidance on how to deal with any payments you make them from a PAYE perspective (e.g. for expenses) here.
For information on the scope of the help that you can expect to find in this section, please see the about us section.
⚠️ Important note - We offer some specific pointers for those considering taking on a personal assistant, to supplement the information here, in our ‘Independent Living’ section.
Where can I get more help?
HMRC manage the UK tax system. You can find their contact details on GOV.UK.
There is a page of basic guidance for people employing someone in their own home on GOV.UK.
HMRC have lots of general help for new employers, including webinars, e-learning, emails and videos on employing people – see GOV.UK for further details.
If you do not agree with a decision of HMRC, find out what action you can take on our tax appeals page.
If you are unhappy with the way in which you have been treated by HMRC, you may be able to make a complaint.
If you have any questions as an employer, in relation to the coronavirus situation, for example about sick pay, changing working hours, leave, laying people off, working from home or the Job Retention Scheme, see our dedicated page.
In terms of your personal tax position rather than in your capacity of employer, if you want information on any of the following areas, you can find it elsewhere on this website:
Tax basics: information on tax allowances, tax rates and how to claim tax back;
Employment: how to check your coding notice, as well as looking at employment expenses and benefits;
Self-employment: how to work out your profits and losses;
Pensioners: tax on, and during, retirement;
Bereavement: tax issues arising on death for the deceased, their estate and surviving family;
Migrants: tax issues for migrants, including residence and domicile;
Students: things students need to know to get their tax right and to understand how student loan repayments work after they graduate;
Disabled people and carers: specific tax issues and pointers;
Other tax issues: including non-taxpayers, savings income and property rental income;
Tax credits and benefits: help to ensure you receive the appropriate credits and benefits;
Childcare: this section explains the different government childcare schemes and how they interact.
LITRG also has another website that you may find helpful:
RevenueBenefits: supporting information for advisers who get involved in HMRC-administered welfare benefits, and national minimum wage; including transitional information for the move of tax credits to universal credit.
Throughout this site we can only offer general guidance on tax topics that are most relevant to those on low incomes and you should always obtain specific advice before taking any action. You can find out where to get specialist help in our getting help section.