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Payroll software: what and who?

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Most people who leave the world of paid employment to set up their own business soon realise something pretty quick – they have swapped one job for two!  Not only are they doing their ‘thing’ during the day but they also have to squeeze in another job or jobs and this includes being the money man or woman.

It’s vitally important to keep a close eye on your finances so that the business stays healthy.  There are also those bits of business that you have to do; VAT, tax returns and payroll.  Even if you are a one person limited company, you still have an employee (that’s you by the way) and have to do the payroll.  This has become more important with the introduction of workplace pensions or auto enrolment.  If you don’t keep on top of this, you could be looking at a very big fine.

Fortunately, there are several online software tools that can help you deal with this fast and accurately.  In fact, in recent years the UK has seen some very good small business accounting tools launch that pretty much do what you could’ve paid a booker and accountant to do.  My small business with 6 employees used to pay several thousands of pounds a year for something software now does for £30 a month.

You can get software that just takes care of the payroll or something that does that and a whole lot more such as:

  • Send invoices and chases people up if they don’t pay.
  • Talks to your bank and reconciles your accounts.
  • Does the VAT and sends it to HMRC.
  • Does the payroll and also sends the monthly returns to HMRC.
  • Looks after expenses, bills, sends estimates and produces reports for anyone who’s interested.

Our top picks:

Company

Cost

Why

HMRC

Free

Basic payroll calculations and reports

SageOne Payroll

 £3 pm for 5 employees

Up to £25 pm for 25

Just does the payroll but does it well.

Freeagent

£22.80 pm sole trader

£35 pm limited company

Pretty much runs the business and tells the tax office all it needs to know.  Really easy to use and great support.

XERO

£26 pm plus £6 pm for payroll

(up to 5 employees)

Does just as much as Freeagent at a similar price.

Discount codes are often available, which can lighten the cost.

Currently all of our payroll software top picks do not have automatic data transfer to pension providers to support automatic enrolment.  They all produce CSV files as an output but these files will require manual manipulation to be accepted by your pension provider portal and not all pension providers provide a portal to upload a file.  The functionality to be able to seamlessly transfer data from your payroll software to your chosen pension provider is all ‘work in progress’ by our top picks.

Disclosure – we’ve been using Freeagent for years and absolutely love it.  It saves us so much time and keeps all the money stuff in order.  It chases late payers in the background and also accepts online payments. It all happens automatically and I don’t have to get involved.  We’ve been following XERO for just as long and it’s every bit as good, in fact they are about to launch direct links to some workplace pension schemes that will save even more time.

If you just want the payroll, have a look at HMRC’s own tool or SageOne that does a bit more for a few quid a month.

Boring Money Tips

  • When choosing accounting software start by making a list of the features you need so that you don’t end up paying for stuff you don’t use. Having said that, we didn’t know that we would really like some of the stuff the software does so check it out thoroughly.
  • Make sure the data is in the UK (or the EU as long as we are) and see if the company is UK based so it understands what we have to deal with.
  • Can your accountant access it? There are times when he or she needs to have a dig around and not having to pull all those numbers together yourself because the software has done it works for me.
  • Check out the support available. With some it’s a real DIY approach but others, especially Freeagent, have superb support provided by real life accountants.

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