What are the tax implications of taking on staff?

Employing staff involves a range of tax issues. Find out all about them.

Employing people involves serious responsibilities. When a business takes on employees, it must notify the Revenue either by sending in the P45 forms or by completing a form P46 in the case of employees who do not have a P45. As an employer, it takes on responsibilities under the employment protection legislation.

On making any payment of remuneration, the employer must deduct income tax under the PAYE system in accordance with the code numbers issued by the Revenue. It must also deduct primary Class 1 NICs and pay secondary Class 1 NICs.

Additionally, the employer may be required to administer the following:

  • Statutory sick pay and maternity pay
  • Student loan repayments
  • Working families’ tax credits
  • Stakeholder pensions for employees (proposed)
  • Scottish variable rate (in Scotland)

For more information on these subjects, see our Employing Staff section.

This checklist has been provided by the Chartered Institute of Taxation. The Institute can be reached on 020 2235 9381 and can provide assistance with finding a tax advisor in your area.


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