A guide to PAYE (Pay As You Earn) and Pensions
If your PCC has any paid workers or employees, the guidance here will help you find what actions you need to take.
What are my PCC's responsibilites?
It is vital that PCCs act responsibly as employers in regard to income tax, national insurance and workplace pensions.
We have produced this briefing paper to inform PCCs of the issues relating to paying employees and ensuring that HMRC guidance is correctly applied.
- Click here for the Introduction to PAYE on the Government website.
- Click here to read the HMRC guidance for Local Religious Centres (LRCs).
- Click here to download the New Starter Checklist (this replaces the P46). Use this form if you're an employer and need to record information about a new employee for PAYE.
Does my PCC need to run PAYE?
Your PCC must register with HMRC as an employer, and operate a Pay As You Earn (PAYE) Scheme if any of the following apply:
- you pay an employee at or above the PAYE or NI (National Insurance) lower earnings threshold,
- you employ anyone who already has another job,
- you employ anyone who is receiving a state, company, or occupational pension,
- you provide an employee with employee benefits.
It is your responsibility as a PCC to establish:
- who your employees are,
- whether you are required to register as an employer and operate a PAYE Scheme.
Once your PCC has registered as an employer, all payments to all employees - regardless of amount or frequency - must be reported to HMRC through the PAYE system.
If your PCC does not need to operate a PAYE Scheme, but you do employ individuals on a regular or occasional basis, you need to retain records - for the next three full tax years - of each employee's:
- full name, address and NI number,
- total amount paid over the tax year.
PCC employee or self-employed?
Anyone who receives money from a church for any reason, other than the reimbursement of allowable expenses, may be an employee of the PCC. This includes any honorarium (usually paid to someone for a 'service' for which there is no 'official' charge), regular, irregular, or one-off payments. For example, PCCs often employ people in the following roles:
- organists
- vergers
- sextons
- cleaners
The only exceptions are clergy (including retired clergy) who are 'Office Holders' rather than employees.
If an individual is not already registered with HMRC as self-employed, you can use HMRC's anonymous Employment Status Indicator (ESI) to verify the person's employment status.
PAYE Software
If you need to register a PAYE scheme with HMRC, you may find it helpful to use PAYE software to help you manage the process. To operate effectively, PAYE software needs to be able to connect with HMRC online to update your records on their system.
Click here for a list of HMRC validated PAYE software.
Some of the software listed should be free to use if your PCC employs fewer than ten people. If a PCC decides to operate their own PAYE Scheme, they need to be aware that their scheme administrator will need to send (at least) monthly reports to HMRC, regardless of whether anyone was paid or not within the reporting time period.
Real Time Information (RTI)
HMRC requires all UK employers to notify them of any payments made to their employees at the time they pay them. This notification is referred to as Real Time Information, or RTI.
You can find a guide for churches on the Parish Resources website, and more detailed information on the HMRC website.
Payroll Bureaus
Because of the specialised and time-sensitive nature of payroll services and reporting, there may not be any suitable volunteers within the local church family who will take on this adminisation role. PCCs should be aware that there are third-party companies and charities that, for a fee, will provide payroll services on their behalf. The Payroll Bureau would normally provide payslips to the PCC, for the PCC to then pay their people and any income tax directly to HMRC.
Pensions
The law on workplace pensions has changed. Under the Pensions Act 2008, every employer in the UK must put certain staff into a pension scheme and contribute towards it. This is called ‘automatic enrolment’.
If your PCC is a registered employer, you must consult the Pensions Regulator's website to determine when you must auto-enrol all eligible workers and offer a workplace pension to any others who wish to join.
You can access the latest information on what this means for your PCC through the Pensions Regulator's website.
You can also find guidance on who might provide your church with a suitable pension scheme on the Parish Resources website.