National Insurance (NI) is a fundamental component of the welfare state in the United Kingdom. It acts as a form of social security, since payment of NI contributions establishes entitlement to certain state benefits for workers and their families.
A pay-as-you-earn tax (PAYE), or pay-as-you-go (PAYG) in Australia, is a withholding of taxes on income payments to employees. Amounts withheld are treated as advance payments of income tax due. They are refundable to the extent they exceed tax as determined on tax returns. PAYE may include withholding the employee portion of insurance contributions or similar social benefit taxes. In most countries, they are determined by employers but subject to government review. PAYE is deducted from each paycheck by the employer and must be remitted promptly to the government. Most countries refer to income tax withholding by other terms, including pay-as-you-go tax.
A payroll is a list of employees of a company who are entitled to receive compensation as well as other work benefits, as well as the amounts that each should obtain. Along with the amounts that each employee should receive for time worked or tasks performed, payroll can also refer to a company's records of payments that were previously made to employees, including salaries and wages, bonuses, and withheld taxes, or the company's department that deals with compensation. A company may handle all aspects of the payroll process in-house or can outsource aspects to a payroll processing company.
His Majesty's Revenue and Customs is a non-ministerial department of the UK Government responsible for the collection of taxes, the payment of some forms of state support, the administration of other regulatory regimes including the national minimum wage and the issuance of national insurance numbers. HMRC was formed by the merger of the Inland Revenue and HM Customs and Excise, which took effect on 18 April 2005. The department's logo is the Tudor Crown enclosed within a circle.
An independent contractor is a person, business, or corporation that provides goods or services under a written contract or a verbal agreement. Unlike employees, independent contractors do not work regularly for an employer but work as required, when they may be subject to law of agency. Independent contractors are usually paid on a freelance basis. Contractors often work through a limited company or franchise, which they themselves own, or may work through an umbrella company.
In the United Kingdom, and formerly in the Republic of Ireland, a P45 is the reference code of a document titled Details of employee leaving work. The term is used in British and Irish slang as a metonym for termination of employment. The equivalent slang term in the United States is "pink slip".
A professional employer organisation (PEO) is an outsourcing firm that provides services to small and medium-sized businesses (SMBs). Typically, the PEO offering may include human resource consulting, safety and risk mitigation services, payroll processing, employer payroll tax filing, workers' compensation insurance, health benefits, employers' practice and liability insurance (EPLI), retirement vehicles, regulatory compliance assistance, workforce management technology, and training and development. The PEO enters into a contractual co-employment agreement with its clientele. Through co-employment, the PEO becomes the Employer of Record (EoR) for tax purposes through filing payroll taxes under its own tax identification numbers. As the legal employer, the PEO is responsible for withholding proper taxes, paying unemployment insurance taxes and providing workers’ compensation coverage.
In the United Kingdom, a P60 is a statement issued to taxpayers at the end of a tax year. It is important a taxpayer does not destroy the P60 forms issued to them, as they form a vital part of the proof that tax has been paid. They were also issued in Ireland until the 2018 tax year.
A tax refund is a payment to the taxpayer due because the taxpayer has paid more tax than owed.
In the United Kingdom, a tax return is a document that must be filed with HM Revenue & Customs declaring liability for taxation. Different bodies must file different returns with respect to various forms of taxation. The main returns currently in use are:
Per diem or daily allowance is a specific amount of money that an organization gives an individual, typically an employee, per day to cover living expenses when travelling on the employer's business.
Form P11D is a tax form filed by United Kingdom employers for each director and for each employee and sent to the tax office with which their PAYE scheme is registered. P11Ds are used to report benefits provided and expense payments made to employees by employers that are not put through the payroll. The employees are also given a copy, should they need it for a self-assessment tax return.
The National Insurance number is a number used in the United Kingdom in the administration of the National Insurance or social security system. It is also used for some purposes in the UK tax system.
IR35 is the United Kingdom's anti-avoidance tax legislation, the intermediaries legislation contained in Chapter 8 of Income Tax Act 2003. The legislation is designed to tax 'disguised' employment at a rate similar to employment. In this context, "disguised employees" means workers who receive payments from a client via an intermediary, i.e. their own limited company, and whose relationship with their client is such that had they been paid directly they would be employees of the client.
An employment agency is an organization which matches employers to employees. In developed countries, there are multiple private businesses which act as employment agencies and a publicly funded employment agency.
Misclassification of employees as independent contractors is the way in which the United States and other countries classify the problem of false self-employment. In the U.S., it can occur with respect to tax treatment or the Fair Labor Standards Act.
A managed service company (MSC) is a form of company structure in the United Kingdom designed to reduce the individual tax liabilities of the directors and shareholders.
Sharesave, also known as Save As You Earn, SAYE, or the Savings Related Share Option Scheme, is a British savings scheme designed to encourage employees to buy stakes in the companies for which they work. It was introduced by the British government in 1980, with HM Revenue & Customs approval, according to a model set by the Treasury. From 6 April 2014, HMRC approval will no longer be required for a SAYE plan to obtain tax benefits, instead an employer is required to self-certify that the SAYE meets the requirements of the relevant legislation. Accordingly, from 6 April 2014, a SAYE plan should no longer be referred to as an HMRC approved plan.
The Apprenticeship Levy is a UK tax on employers which is used to fund apprenticeship training.
False self-employment is a situation in which a person registered as self-employed, a freelancer, or a temp is de facto an employee carrying out a professional activity under the authority and subordination of another company. Such false self-employment is often a way to circumvent social welfare and employment legislation, for example by avoiding employer's social security and income tax contributions. While a modern "gig economy" encourages more casual employment practices in the interests of labour flexibility, the extent to which this disguises precarious employment and denial of rights is of growing concern to authorities.
