January is one of the busiest periods for most accountants as payroll year-end is just around the corner. In theory, it should just be a simple month-12 or week-52 payroll but these things often end up being a little more complex than first imagined! We have put together this quick payroll year-end checklist to help yours run a little smoother.
Before we even go into the steps you can take to improve your payroll process, it is important that you have these dates stamped into your mind. Your final reports to HMRC for the 21/22 tax year need to be submitted no later than the 19th April 2022. Then, you need to prepare for the new tax year by making sure your employees receive their P60s no later than the 31st May 2022.
So now you have those dates firmly in your mind, let’s continue with the payroll year-end checklist.
In some cases, your payroll may not actually end on week 52 and you may have to complete an additional payroll to cover these extra few weeks. The main instances where this happens is if:
For most payrolls that run monthly, they only ever have 12 months in them so you can run your payroll as usual and not worry about any extra paperwork. If this does affect you, employees will need to be swapped over to a week one tax code for the extra payroll. Most payroll software such as Sage 50cloud should automatically take care of this for you, but it is always worth carrying out a manual check just in case.
If employees have left or joined your business within the past tax year then you need to ensure they have been processed correctly. It may be that you need to discuss this with management staff just to check. If you take care of your payroll on a regular basis then this shouldn’t be a problem anyway, it is more of a last-minute check to ensure things are all in order. It is always much easier to fix any issues before your payroll is submitted than afterwards.
Once you have carried out steps 1 and 2, you can now send your final FPS (Full Payment Submission) – the deadline for this is the 19th April. Submit this as normal and then you can proceed with the payroll year-end process.
Before 2020/21 there was a way to submit retrospective adjustments via an Earlier Year Update but this has recently been scrapped. As always with anything that is submitted to HMRC you are best taking the necessary precautions to avoid retrospective adjustments.
Using your payroll software, make sure your processing date is set for the 5th April and then you can process your year-end, making your final submission for the 2020/21 tax year. Once you have completed this, you are then able to produce your P60s for your staff. Remember this before the 31st May.
All your employees who are working on the final tax day of the year (5th April) will need to receive a P60 from you. This also includes employees who may be on your payroll due to IR35. Using your payroll software, you can generate your P60s and securely share them online with your employees (just like you do with their payslips). If you are a proactive business owner you may be tempted to run the P60 creation as soon as possible after year-end, but remember that you need to ensure the final payslip has been issued first.
The closing of one tax year and the opening of the next are two separate processes, so make sure you bear that in mind. As soon as you close one off (and before starting your month 1 or week 1), you need to refer to the P9X.
The P9X is a document published by the HMRC that explains which tax codes employers must either change or carry forward on the 6th April. There are often minor changes each year, so to prevent any issues when processing your year-end the following year you need to go through this document thoroughly. There is no clear guidance as to what the 2022/23 P9X will give yet so don’t try and guess anything – wait for the formal document to be released.
So there you have it, a basic payroll year-end checklist for you to follow. Payroll really doesn’t have to be something that is stressful, and with a bit of forward planning you can make things a lot easier for yourself at the end of the tax year. If you want to find out about how Sage 50cloud can help improve your payroll process, get in touch with the team at Reality Solutions today.