Payroll Glossary of Terms & Abbreviations used in the UK

Automatic Enrolment

Automatic enrolment makes it compulsory for employers to automatically enrol their employees in a pension scheme as of 2018. The employer is also required to pay money into this scheme.

BACS

Bankers Automated Clearing Service. An electronic payment system used to make payments directly from one bank account to another. These payments usually take 3 working days to process.

Benefits in kind

Also known as non-cash benefits, benefits in kind are taxable items or services that are provided to employees on top of their regular salary. Benefits in kind can include perks like private healthcare, gym memberships, company cars and travel expenses. 

CHAPS

The Clearing House Automated Clearing Service. A same-day payment system traditionally used for high-value transactions and transactions on a tight schedule.

CIS

Construction Industry Scheme. Under this scheme, registered contractors deduct money from a subcontractor’s payments and forward it to HMRC as advance payment for tax and National Insurance.

Deductions

These are amounts taken out of an employee’s paycheck, for example NI tax. Deductions are the reason why an employee’s gross pay will be different from their net pay.

Gross pay

This is the total amount an employee receives prior to any tax deductions.

HMRC

Her Majesty’s Revenues & Customs. They are the UK government’s official regulatory body responsible for the administration and collection of taxes.

Net pay

This is the total amount an employee actually takes home after all deductions have been withdrawn.

NI

National Insurance. Every employee earning over £166 per week must contribute towards the National Insurance tax. You pay 12% of your earnings above this limit up until you earn £962 per week. You then pay 2% of your earnings on any money earned above this threshold.

PAYE

Pay as You Earn (PAYE) is the scheme through which employers deduct tax from their employees’ salaries on the behalf of HMRC. 

Payroll

The term ‘payroll’ encompasses all methods and calculations an employer uses to determine pay for employees and all necessary deductions required.

Pension

A pension scheme is a long-term saving plan for retirement that you pay into whilst still working. Pension schemes also often have favourable tax treatment in comparison to other forms of saving.

With a workplace pension, a percentage of your monthly pay is put towards the pension scheme and your employer is also required to add money for you. 

P11D

A P11D is a statutory form that HMRC requires from UK employers that details what cash-equivalent benefits are being provided for employees and directors earning over £8,500.

MATs

Multi-Academy Trust.

Tax code

As an employee, you have a tax code that your employer and HMRC use to determine how much Income Tax should be deducted from your pay.

Tronc

Tronc payroll. A tronc is a separate organised pay arrangement sometimes used to distribute tips, gratuities and service charges in restaurants, hotels and other hospitality establishments. If your employees get payments through a tronc the person who runs the tronc - called a troncmaster - must run a payroll and report the information to HM Revenue and Customs ( HMRC ).

 

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