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Payroll – what you need to know

So you need to run a payroll?

When you decide it’s time to pay yourself through a payroll, if you’re already on Xero, you’ll need to get the Xero Payroll Add-On at £5 for 5 staff plus VAT – and away you go!

As with all things in life there are a few payroll basics you need to know, and do, first. Here’s some of them;

  1. Have a directors/owners pay strategy: this means making sure you pay yourself in the most tax efficient way, and from April 2016 you know the expected impact of the Governments tax changes planned for dividends.

2.  Register your business with HMRC for PAYE Tax. They’ll give you a PAYE reference which you need to run a payroll in the UK. You will also get a PAYE On-line login.

3.  Understand the Auto Enrolment Pension rules. Every employer will have duties under AE, even if it’s to assess only yourself and let the Pensions Regulator know you’ve done so. Follow the link below to the employer’s duties checker.

  1. Xero are introducing the AE functionality needed for assessment of workers soon too. If your business is Staging in 2016 this may well cause you some anxiety and extra work – but we are told to expect the catch up functionality by 2016 – Yay!
  1. Once you get your PAYE reference number, check up on your company’s staging date for Auto Enrolment. At the moment this can’t be helpfully stored on Xero Payroll – but that functionality is coming very soon.
  1. Know all you need to know about how to report to HMRC, how to actually pay any Tax and NI due, and how to send a Real Time Information return on time to HMRC. All modern payroll software will deal with this for you – but you remain responsible for ensuring it’s done at the correct time.

Check out the HMRC guideline here.

7.  You will usually pay HMRC every month – but if you expect to pay less than £1,500 a month, you can arrange to pay quarterly if you wish. Contact HMRC on the above link for this.

8.  Decide who is going to run your payroll. You can do it yourself or pay a payroll provider like a bureau or an accountant to run your payroll for you. Remember, you remain responsible for keeping employee records, and you must give them a payslip. Xero Payroll software deals with all of this and payslips are e-mailed to the staff.

9.  From April 2016, the government is allowing employers to payroll certain employee benefits in kind. Payrolling is where the employer includes a value for benefits in kind as taxable pay so the income tax is collected in real time. You may need to give this some consideration.

Here’s a summary for Setting up Payroll

If you decide to run payroll yourself, you need to complete certain tasks to pay your employees for the first time. You can choose when and how often to pay your employees.

  • Register as an employer with HMRC and get a login for PAYE Online.
  • Choose payroll software to record employee’s details, calculate pay and deductions, and report to HMRC. Xero Payroll does this, so do all cloud payroll solutions.
  • Collect and keep records.
  • Tell HMRC about your employees.
  • Record pay, make deductions and report to HMRC on or before the first payday.
  • Pay HMRC the tax and National Insurance you owe.
  • You’ll also need to complete certain annual reports and tasks


You can check out how-to videos for Xero Payroll here.

To talk payroll and Automatic Enrolment duties get in touch at or contact us here.



Late Payment reminders

Chasing Debts

This week Xero released it’s Invoice Reminders functionality.

Invoice reminders gives you the basic ability to remind customers about the invoices you’ve sent them, that they haven’t paid yet. This seemingly small and low-key feature highlights the importance of consistent debtor chasing for all small businesses. In a climate where cash is still King it’s well worth looking at this feature.

Debt Collection

Here’s a list of 6 other things you can do to minimise the risks of late payments:

  1. Have a consistent approach to credit control – that’s the fancy name for collecting what’s owed to your business. If you keep your receipts reconciled and up to date, you can set Invoice Reminders in Xero, to automatically go out to customers – but beware – if you automate this and you don’t keep the accounts up to date you may send a payment prompt to a customer who’s paid you.
  2. Be clear and transparent at the beginning of a business agreement so both parties fully understand the payment terms. If your business operations would benefit from a Ts&Cs document, create one and send it to your customers, so it’s clear what’s expected.
  3. Look at alternative payment methods to avoid late payments like having on-line invoices with a PAY NOW button on them. You can sign up to payment gateways like PayPal or GoCardless. They do charge a fee but you can factor that into your prices, or consider it’s a much lower fee to pay than you having to spend hours chasing the money.
  4. Always print your bank account details on your invoices so the customer has the details to hand.
  5. Encourage customer to pay by direct debit or offer an incentive to pay early.
  6. If you have stubborn late payers, you could introduce a charge for late payments – but this is best documented in your Ts&Cs

For more complex debtor management tools – or if you have a larger volume of late payers you need to regain control of –  you can check out the Xero Add On market place to find software that can automate the debt collection process for you, saving time and thought, as it means your business will have a firm and consistent approach to debt chasing. Chaser, in particular, adds the human touch to debt collection, and offers a free 90 day trial. This software has a polite and persistent email chase approach, but with a UK human voice tone to it. When we trialled Chaser we found it to be very effective and there’s a much smaller chance you’ll upset those repeat customers, that you want to pay you, and you want to keep!

What You Can Do With Xero’s Invoice Reminders

You can set a track of up to five different reminder emails.
You can set these different reminders to go out at a set number of days by reference to a given invoice’s due date.
You can switch off reminders for particular customers or invoices that you don’t want to receive a reminder.
On the appointed day by reference to due date, a reminder about each outstanding invoice will be sent out to your customer from a Xero Robot address – between 4am and 8am in your timezone.
You can set an email address of your choosing for replies to those reminders to be sent to.

Invoice Reminders is a simple, chasing tool built into Xero. It may well be all you need to keep on top of prompt payment, and if you need more – you know where to look.

Starting a business with a friend

Starting a business with a friend or family member?

What do you need to know about being a shareholder?

Shareholders agreements

If you raise finance by selling shares in your business, have you thought through all the implications?  What is a Shareholders’ Agreement and do you need one?

You might like to know that many limited companies choose to draw up a shareholders’ agreement to deal with any potential future issues.

What is A Shareholders’ Agreement?

It’s a legal document that outlines the rights and responsibilities of shareholders, regulates their relationship with one another, confirms how a company should be managed, and clarifies the way in which decisions can and cannot be made. It lays out the rules.

You’ll find this is useful document to put in place because it covers exceptional events like the death of a shareholder, which can create a number of problems for the remaining shareholders.

A shareholders’ agreement usually contains a provision of pre-emption rights of existing shareholders – which requires available shares to be offered to existing shareholders before anyone outside of the company.

If no such agreement is in place, you may find shares can be offered to individuals who lack the necessary business knowledge and experience to support the company’s vision or business plan. This could have a negative impact on the control of the remaining shareholders and, ultimately, the success of the business.

Shareholders agreement

Our Top reasons for having a shareholders’ agreement in place

  • An agreement provides greater protection for limited company shareholders by allowing more specific provisions than those contained in the standard articles of association.
  • Provisions or arrangements can be included that apply to individual and current shareholders only  – the provisions in the articles are generalised and apply to all current and future shareholders.
  • An agreement provides an effective framework for resolving disputes between shareholders.
  • Unlike the articles, a shareholders’ agreement is a private and confidential document that the public has no access to.
  • An agreement shows the unity and stability of the shareholders, which can be appealing to banks and investors.
  • An agreement can protect the interests of shareholders and their beneficiaries in the event of the death of a shareholder.
  • A Shareholders agreement can provide better protection for the rights and investment value of minority shareholders.
  • The agreement outlines dividend policies and distribution of profits.
  • An agreement can specify decisions that require a 100% majority vote of the shareholders.
  • It can clarify the particulars of pre-emption rights.
  • An agreement allows shareholders to restrict the powers of company directors.
  • An agreement can be used to set out the terms of a director’s salary.
  • It usually provides for the regulation and restriction of the allotment or transfer of shares.
  • An agreement can outline the terms of selling or closing the company.

How to arrange a shareholders’ agreement

Usually, a shareholders’s agreement should be discussed and drawn up as soon as a company is formed in order to minimise disagreements and internal conflicts further down the line, but it is still possible to introduce one, at a later stage.

Standard shareholders’ agreement templates are available on-line and you can also create bespoke agreements with a variety of legal companies on-line.

We recommend consulting a solicitor for the most appropriate and up to date legal advice. We always advise that you set up a Shareholders Agreement if there’s more than one shareholder.

For more info e-mail or call 01603 516 304 for a free chat