Covering PAYE and National Insurance Contributions

Are you struggling to cover your PAYE and national insurance contributions (NICs) with enough spare cash to invest in business growth? Rising expenses, ongoing cost-of-living struggles and other economic factors, such as the increasing rate of employer NICs announced in the 2024 Autumn Budget, can heap real pressure on small businesses. 

In this article, we discuss the need for efficient payroll processes and good cash flow management, including actionable tips for overcoming key challenges and the benefits of using flexible tax loans.

The importance of PAYE and national insurance (NI) payments

Ensuring your business manages its PAYE and national insurance contributions efficiently and responsibly is not optional for businesses. Especially in a volatile business environment. 

Missteps with PAYE and national insurance contributions can prove costly for your reputation (in the industry and amongst prospective employees) and attract scrutiny and potential penalties for your business.

What are the consequences of late PAYE and NI payments? 

• Financial penalties from the government: HMRC charges late payment penalties on regular PAYE financial obligations that are not paid in full and on time. The penalties are a percentage of the amount owed, starting at 1% and rising to 4%, depending on how many PAYE defaults you’ve had within the tax year.* Go to the gov.uk webpage on PAYE late payments for more details.
• Damage to employee trust: Mistakes in payroll, miscalculations or late payments can impact trust in your business, resulting in a loss of confidence amongst the workforce, increased churn and potential brand damage.
• Potential legal repercussions: Failure to address issues with PAYE obligations, recurring late payments or non-compliance with regulators and HMRC can lead to legal claims and further penalties.
• Impact on credit ratings and financial support: Your credit score can take a hit, which may reduce your chances of being approved for loans, government allowances and tax relief while affecting perception amongst suppliers.

*Your first failure to pay on time won’t count as a default.

Why some businesses struggle with their PAYE and NI contributions

Small business owners will know the pressures and challenges of balancing cash flow and working capital. From seasonal fluctuations to unexpected costs and projects with lengthy payment schedules.

In iwoca’s 2025 SME Outlook study, 42% of small and medium-sized business owners cited rising costs and taxes as their biggest worries. So, it’s no wonder many companies are seeking ways to address cash flow concerns to meet regular payment and tax obligations. 

Key PAYE and NI challenges for businesses

• Changing tax rules and compliance complexity – keeping up with new tax laws, allowances and thresholds can be tricky, especially for small businesses
• Making PAYE/NI adjustments amidst workforce changes, such as new hires, promotions or redundancies
• Cash flow issues due to seasonal fluctuations, late supplier/client payments and unexpected business costs, such as site repairs or system upgrades
• Accounting errors (by humans and systems) and payroll processing issues – miscalculating deductions, misclassifying employees or inaccuracies in Real-Time Information (RTI) submissions can lead to penalties, employee frustration and compliance issues
• Owed tax deferrals from previous relief periods, such as after the pandemic
• Government changes – as mentioned, Labour’s 2024 Autumn Budget set out increases of NI contributions on salaries above £5,000 to 15% from April 2025

Tips for managing PAYE and NI obligations effectively

So, how can you overcome these challenges? Below we’ve outlined some tips for managing your PAYE and national insurance contribution needs: 

• Align payroll with your cash flow (as closely as possible) to reduce the pressures of awaiting receivables and revenue in crucial periods
• Bolster your financial control with an accountant or new accounting tools to improve PAYE management and tighten up compliance 
• Consider using dedicated payroll software and forecasting tools to help manage PAYE and NI submissions while monitoring working capital and predicting future liabilities and cash flow
• Explore potential payment plans or a PAYE loan for businesses to ease pressure in difficult times or certain financial periods

How tax loans can you help manage your payroll obligations

Tax loans can offer a timely capital injection during important periods, helping you maintain healthy cash flow, operate efficiently and make consistent payroll and PAYE submissions.

Insights from iwoca’s Q3 2024 SME Expert Index found that 61% of brokers identified managing cash flow as the top reason for SME loan applications. 

What is a tax loan?

A tax loan is a short-term business finance solution that helps companies cover their tax bills without draining cash reserves. The funds can prevent regular and periodic tax commitments from causing cash flow gaps, with manageable monthly payments over an agreed loan term.

Tax loans can come in the form of unsecured loans or secured loans. You’ll pay fixed month repayments for easy budgeting and credit management, while some lenders, like iwoca, offer flexible terms aligned with your cash flow, with options to repay the loan early without penalties and to avoid incurring unnecessary interest.

5 benefits of using tax loans for PAYE and NI contributions

A PAYE loan for businesses can relieve pressure and offer breathing space to make key investments and progressive decisions without worrying whether business employee tax and NI contributions can be met.

Here are some of the main benefits of using tax loans:

1. Spreading tax payment liabilities over time with monthly instalments
2. Boosting cash flow and keeping working capital levels in good shape to maintain financial and operational stability
3. Avoiding late payments and subsequent penalties from HMRC
4. Flexibility to use funds as required as short-term relief over a specific period
5. Protecting brand reputation and keeping your credit rating strong

Introducing iwoca loans for flexible business tax financing  

iwoca is a leading flexible business loan provider for UK companies. Our short-term loans are designed to help SMEs overcome cash flow challenges, provide quick and easy access to funds and empower business growth. 

Using our business tax financing allows you to spread the cost of tax liabilities with manageable monthly repayments, preserving working capital and easing cash flow pressures in tricky times.

Reasons to explore iwoca’s Flexi Loans for your tax liabilities

• The simple application process, where we minimise documentation and look beyond the credit score
• Quick approvals and fast access to capital – typically, you can expect a decision within 24 hours and funds are often made on the same day, which is ideal considering the urgent nature of PAYE and NI payments
• Flexible repayment terms – borrow between £1,000 and £1,000,000 for a day up to 60 months
• Only pay interest on what you use and make early repayments free of charge

Explore our Flexi-Loans and see how we can keep your business moving, making PAYE and NI contributions less of a headache.

Learn more about iwoca’s tax loans

PAYE & NI contributions FAQs

How often do I need to submit PAYE and NI payments?

You must make PAYE and NI payments each month (or quarterly if your business pays less than £1,500) and submit a report of your employees’ payments and deductions to HMRC on or before each payday via RTI each payday.

Can small businesses reclaim NI contributions?

Yes, some small businesses are eligible for Employment Allowance, which reduces your national insurance contributions (NICs) by up to £5,000 each tax year. You can get this relief if your employers’ Class 1 National Insurance liabilities were less than £100,000 in the previous tax year. Certain sectors may receive additional relief – see HMRC’s Employment Allowance eligibility criteria for more information. 

What happens if I miss a PAYE payment?

You’ll incur penalties for PAYE amounts that are not paid in full or on time. HMRC charges late payment penalties at 1% after your first default. This percentage rises up to 5% for persistent late payments/submissions.

Sources:

• Late Payment Penalties for PAYE and National Insurance [Gov.uk]
• Tax Loans: How to Finance Your Corporate Tax Bill [iwoca: Finance Explained]
• 2025 SME Outlook: Tax Concerns and Political Uncertainty Persist Despite Bold Growth Plans [iwoca]
• National Insurance Contributions Explained [The Institute for Fiscal Studies]
• How to Manage National Insurance Contributions [Xero]
• 2024 Gen Z and Millennial Survey [Deloitte]
• Employment Tax and National Insurance Contributions: All You Need to Know [Grow London]

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