Cumulative
In payroll, a cumulative amount is a total since the start of the tax year (6th April). For example, if an employee is paid £1000 at the end of April and £1000 at the end of May, the cumulative pay at the end of May will be £2000. PAYE Income Tax is normally calculated on a cumulative basis, by starting with the cumulative pay and working out what the cumulative tax should be.
Close Window
Gross Pay
Gross Pay is the total pay before taking off tax, national insurance and any other deductions. Gross Pay can include salary, overtime, holiday and sick pay, bonus, commission and other payments.
Close Window
H.M. Revenue & Customs (HMRC)
H.M. Revenue & Customs (or HMRC) was created by the merger of the Inland Revenue and Her Majesty's Customs and Excise in 2005. It deals with the collection of tax, national insurance contributions and VAT.
Close Window
HMRC Helpbooks
As guidance for employers, HM Revenue and Customs publishes a variety of
booklets. They can be downloaded in PDF format from the HMRC website or
ordered free of charge from the HMRC Employers Orderline (0845 7 646 646).
These booklets include:
- Helpbook E13 "Day to Day Payroll"
- Helpbook E12 "PAYE & NICs rates & limits"
Net Pay
Net pay is the amount of money actually paid to the employee on pay day. It is the gross pay, minus all of the deductions.
Close Window
P45 "Details Employee leaving work"
A P45 is a form that is filled out by an employer and given to an employee when they leave. The employee should then give the P45 to their new employer when they start a new job. The new employer uses the information from the P45 to ensure that the correct amount of tax is deducted. Employers can order blank forms free of charge from the HMRC Employers Orderline (0845 7 646 646).
Close Window
P46 "PAYE - notice of new employee"
If an employee does not have a form P45 or has lost it, the employer can fill out a form P46 instead. Employers can order blank forms free of charge from the HMRC Employers Orderline (0845 7 646 646).
Close Window
P60 "Certificate of Pay"
At the end of each tax year, employers must give a P60 to each of the employees who were working for them at the end of the year. A P60 includes totals of the pay, tax and national insurance accumulated during the tax year. Employers can order blank forms free of charge from the HMRC Employers Orderline (0845 7 646 646).
Close Window
PAYE
Pay-as-you-earn (or PAYE) is the system used in the UK for deducting income tax from an employee's pay. Each time the employee is paid, their employer is required to calculate and deduct income tax and national insurance.
Close Window
Payroll
For an employer, payroll is the financial record of salaries,
bonuses and deductions, including tax and national insurance
contributions. A payroll system enables the employer to organise these
financial records, to calculate the deductions and to generate the
appropriate paperwork.
Close Window
Payslip
A payslip is a slip of paper given to the employee each time they are
paid. It can be on any type of paper, but it must show
- The gross pay (before tax is taken off)
- Details of all deductions, including tax and NI
- The net pay (after the deductions)
- If the net pay is not paid together, this must be detailed
Close Window
Tax code
Each employee has a tax code to specify the way that PAYE income tax
should be calculated and deducted from their wages. If an employee has
more than one job, they can have a different tax code for each.
Close Window
Back to The Payroll Site