Should I get a PAYE settlement agreement?

Providing employees with gifts and benefits as part of their employment can be subject to income tax and national insurance (NI). A PAYE settlement agreement means that employers cover the tax and NI liability for their employees. Some employers prefer this, particularly for gifts that recognise length of service and they don’t want to pass the tax burden on to employees. 

Where a PAYE Settlement Agreement is in place, employers make an annual payment to cover the tax and National Insurance Contributions (NICs) due on minor, irregular or impracticable expenses and benefits for employees.  

 

Typical examples of benefits that can be included in a PSA are staff entertainment, staff gifts and long service recognition rewards. Cash benefits and regular and large benefits cannot be included in a PSA and should be included either on the payroll or reported on a P11D. 

Employers can apply for a PSA online, then each year employers will need to submit form PSA1. The deadline for applying for a PSA is 5th July following the first tax year it applies, so you can apply now for 2024/25. A PSA can be updated and amended to include or remove benefits each year by 5th July. 

A PSA calculation should be submitted to HMRC by 31st July and any tax and NI owed from a PSA is due by 22nd October when paying online, or 19th October if paying by cheque. 

Got a 2023/24 PAYE Settlement Agreement? 

Any tax and National Insurance must be paid by 22nd October 2024 when paying electronically or 19th October 2024 if paying by cheque. Your calculations should have been submitted by 31st July, if you have not already done so do submit them before payment. 

Once your calculation is processed, HMRC will automatically issue a payslip confirming the amount due which also includes your payment reference number.  

 

 

Date published 21 Aug 2024

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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