‘New business, new employees, new salaries!’
You’ve got your new Personal Training business all set up, you’ve got all your standard finances in order, you’ve got your marketing strategy firmly in place and you’ve hired the staff you need – but how do you go about managing the salaries for all of you?
This is a crucial element of any business and it’s very important you get it right. To help you do this, we’ve recruited the knowledge and expertise of Shaz Nawaz, Director at AA Accountants, who will guide you through some of the finer points of handling your company salaries.
Set Up PAYE
‘Whether you hire your employees on a weekly, monthly or ‘as needed’ basis, they’re all employees so the first thing you need to do is to set up a PAYE Scheme with HMRC’.
This ensures that HMRC are able to collect Income Tax and National Insurance from your employees as they earn their salaries.
‘Don’t think you can get around this by treating them as self-employed or casual workers’, says Shaz. This will only get you (not your employees) in trouble with HMRC further down the line so it really isn’t worth the risk. You can usually operate PAYE as part of your payroll system. Set Up a Payroll System.
‘You can manage your payroll in a number of ways: Manual recording, a computerised system or you can outsource to a payroll service. Whichever you choose, you as an employer have to provide ‘Real Time Information’ to HMRC on or before each payday, so it’s vital to keep this up-to-date and keep detailed payroll records.’
‘You must forward the PAYE income tax and NI that you deduct, plus your own NI contribution to HMRC promptly each month. At the end of the tax year, you must also file your year-end tax returns with HMRC, including benefits-in-kind (e.g. bonuses and perks), so keep a note of these.’
It’s not all as complicated as it sounds though – if you use a computerised system then your payroll software will work out exactly how much tax and National Insurance you need to pay, so you don’t have to be a human calculator!
‘Your employees are entitled to written payslips and an annual statement (P60), as well as a P45 if they leave.’
If you are compiling your employees’ payslips yourself, you need to remember to include the following important information:
- Their total pay before any deductions – this is also known as ‘gross’ income
- Any deductions such as tax and National Insurance
- Their total pay after deductions – also known as ‘net’ income
Once again, your payroll software will most likely have a payslip feature which will make all of this extremely quick and easy. If not, you can always get different software to handle this task. Once you have all the payslips completed, you can give them to your employees in person or send them via email – this just depends on which is most convenient for you and your staff.
What About Yourself?
Of course, it is highly important to make sure your employees are paid and happy. However, this is your business after all, and you need to know how to go about paying yourself a salary too.
‘If your business is a limited company, you can draw a salary and the payroll will run just as it would for any other employee.
If you’re a sole trader, then the profit your company makes is your taxable income and you pay Income Tax and Class 4 National Insurance as calculated from your annual tax return.
If you have set up a partnership, you would file a partnership tax return. You would also pay a flat rate Class 2 National Insurance (monthly or quarterly) as a self-employed individual.’
When it comes to deciding how much to pay yourself, this obviously depends on your overheads, revenue, and profit. In the initial start-up stage, however, it is a good idea to just pay yourself enough for you to get by. This will reduce your overheads and net loss which will give your company room to get well established until it starts making profit.
Now that you’ve got the basics down, you’ll have a fully-fledged Personal Training business up and running in no time at all. All that’s left for you to do now is enjoy the privilege of making a career out of your passion!
To pursue your passion and start a course, click here for more information.