If you pay employees as well as being self-employed, MTD and PAYE are separate systems — but here's what you need to know.
MTD vs PAYE — Two Separate Systems
MTD for Income Tax covers your self-employment income. Your employees' pay goes through PAYE (Real Time Information), which is a different HMRC system. You need to manage both.
Employee Records You Must Keep
- Payslips for every employee for every pay period
- RTI submissions to HMRC (your payroll software does this)
- P60s at the end of each tax year
- Evidence of National Insurance and tax deductions
Does Paying Employees Affect My MTD Threshold?
No. Employee wages are an expense in your self-employment accounts, not income. Your MTD threshold is based on your gross income only.