Lambert Roper & Horsfield Limited Accountants Calderdale, Huddersfield
Business Services

Most businesses are very good at providing the products and services that their customers need – but running a business involves much more than that.

Click here to find out more...

Private Clients

The financial world is a complicated place and there are times when you’ll need some expert help.

Click here to find out more...

Wealth Management

When it comes to your finances, taking time out to seek expert advice is always a wise investment.

Click here to find out more...

Specialist Services

We also provide specialist services to a range of other clients.

Click here to find out more...

You are here: Home » Business News » PAYE Settlement Agreement can save time and costs

PAYE Settlement Agreement can save time and costs


For busy small businesses, a PAYE Settlement Agreement (PSA) offers a simpler alternative to pay your employees.

It allows you to make one annual payment to cover all the tax and National Insurance due on minor, irregular or impracticable expenses or benefits for your workforce.

According to HM Revenue & Customs (HMRC), if you get a PSA for these items, you will not need to:

  • Put them through your payroll to work out tax and National Insurance
  • Include them in your end-of-year P11D forms
  • Pay Class 1A National Insurance on them at the end of the tax year (you pay Class 1B National Insurance as part of your PSA instead).

Why go for a PSA?

The scheme may allow you to cut back on paperwork and administration if you are forever totting up minor taxable expenses, such as employee entertainment, birthday presents, or incentive awards.

You will no longer have to put these expenses through your employee’s payroll, pay Class 1A NICs on them (you’ll pay Class 1B NICs through your PSA), or include these expenses in forms P9D and P11D.

The expenses categories of the settlement agreement include:

Minor expenses

These could be birthday presents, health club memberships, expenses deemed to be personal yet incidental, or even a present, flowers, or a voucher should an employee fall ill.

Irregular expenses

These could include:

  • Relocation expenses over £8,000 (these are tax-free below £8,000)
  • The cost of attending overseas conferences
  • Use of a company holiday flat.

Impracticable expenses or benefits

These are expenses are things that are difficult to place a value on, or divide up between individual employees, but could include:

  • Staff entertainment that is not exempt from tax or National Insurance Contributions
  • Shared cars
  • Personal care expenses, for example, hairdressing.

How to apply

You will need to contact HMRC, with a description of expenses you believe are covered.

Once they’ve agreed on what can be included, they’ll send you two draft copies of form P626. Sign and return both copies. HMRC will authorise your request and send back a form – this is your PSA.

You’ll need to report anything that cannot be included separately using form P11D. You do not need to send a P11D if you’re paying employees’ expenses and benefits through your payroll.

Use form PSA1 to help you calculate the overall amount you’ll need to pay, otherwise, HMRC will calculate the amount and you will be charged more if this happens.

Send to HMRC as soon as possible after the end of the tax year. They’ll get in touch with you before 19 October following the tax year that the PSA covers to confirm the total tax and National Insurance you need to pay.

You’ll need to give an agent a signed letter of authority to make a PSA on your behalf if they do not have the authorisation to do so.

The New LRH Client Portal


We are delighted to announce that the LRH client portal (powered by Onvio, a Thomson Reuters company) is now fully operational… Continue reading →

Get in touch!


Telephone: 01422 360788

Email: mail@lrh.co.uk