An employer has the option of paying for expenses and benefits for their employees, such as providing a company car and paying for the mileage travelled, or medical insurance and childcare; these are only examples and are not the only expenses an employer can contribute to. Any payments on benefits and expenses will have to be declared to HMRC and Class 1A National Insurance (NI) will need to be paid.

Tips are usually voluntary payments made to employees by a customer; tips are paid voluntarily and are not required as per the customer’s receipt, and so there is no VAT to be paid on these. If an organization includes a service charge on their invoices or receipts, which a customer is expected to pay, then these are not classed as voluntary payments and VAT is applied at a standard rate.

The monthly, or weekly, pay information must be sent to HMRC before the employee’s pay reaches them. The information on salary, wages, taxes and deductions must be with HMRC by the 19th of each month, with PAYE tax payments reaching HMRC by the 22nd of the month. Payslips must be either printed out or electronically passed on to the employees, and must show the total gross wages, tax, NI and other deductions, and the net wages that will be paid to the employee. Other information will vary depending on software used and if the payroll team make custom changes.

For many UK residents in PAYE employment, there will be some expenses incurred in their profession which may be required for the role. Usually, provided the expenses are incurred wholly for business purposes, the costs can be reclaimed to claim reliefs against income tax.