UK Payroll Glossary: Terms Explained
UK payroll is full of acronyms and technical terms. This glossary translates the most common terms you'll encounter as a business owner into plain English.
AE (Auto-Enrolment)
The legal requirement for UK employers to automatically enrol eligible workers into a workplace pension scheme and make contributions.
CIS (Construction Industry Scheme)
Rules for how payments to subcontractors for construction work must be handled. Contractors deduct tax from subcontractors’ payments and pass it to HMRC.
EPS (Employer Payment Summary)
A report sent to HMRC monthly to claim back statutory payments (like maternity pay) or to tell HMRC you have no employees to pay this month.
FPS (Full Payment Submission)
The most common report sent to HMRC. It must be sent on or before every payday and contains details of all payments and deductions made to employees.
HMRC (His Majesty's Revenue and Customs)
The UK government department responsible for collecting taxes and administering certain regulatory regimes.
NI (National Insurance)
A tax paid by both employers and employees to fund state benefits, including the State Pension and the NHS.
Net Pay Arrangement
A method of pension contribution where the employee's contribution is taken from their gross pay before Income Tax is calculated. This means the employee gets full tax relief immediately.
PAYE (Pay As You Earn)
The system HMRC uses to collect Income Tax and National Insurance from employees' pay as they earn it.
Relief at Source
A method of pension contribution where the employee's contribution is taken from their net pay (after tax). The pension provider then claims basic rate tax relief (currently 20%) from HMRC and adds it to the employee's pension pot.
RTI (Real Time Information)
The current system for reporting payroll data to HMRC, where information is sent electronically every time employees are paid.
Salary Sacrifice
An agreement between an employer and an employee to reduce the employee's gross salary by an amount equal to their pension contribution. The employer then pays this amount directly into the pension scheme as an employer contribution. This can result in National Insurance savings for both the employer and the employee.
SSP (Statutory Sick Pay)
The minimum amount you must pay an employee if they are too ill to work for 4 or more days in a row.
YTD (Year To Date)
The total amount of an employee's earnings, tax, and NI contributions since the start of the current tax year (6 April).
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