Setting up your payroll for the new tax year

Setting up your payroll for the new tax year

This blog provides an overview of the steps that you have to undertake as an employer to set up your payroll for the new tax year. It is based on information obtained from the HMRC web site https://www.gov.uk/payroll-annual-reporting

As an employer running payroll, you need to:-

  • report to HM Revenue and Customs (HMRC) on the previous tax year (which ends on 5 April) and give your employees a P60
  • prepare for the new tax year, which starts on 6 April
What you need to do When
Send your final payroll report of the year On or before your employees’ payday
Update employee payroll records From 6 April
Update payroll software From 6 April
Give your employees a P60 By 31 May
Report employee expenses and benefits By 6 July

Send your final payroll report before you set up payroll for the new tax year

You need to send your final Full Payment Submission (FPS) on or before your employees’ last payday of the tax year (which ends on 5 April).

If you run more than one payroll under the same PAYE scheme reference (for example for employees you pay weekly and monthly), you should include the end-of-year information in your last report.

Update employee payroll records

For each employee working for you on 6th April, you will need to:-

  • prepare a payroll record
  • identify the correct tax code to use in the new tax year
  • enter their tax code in your payroll software

You should include in your payroll:-

  • all employees you pay in the tax year, no matter how much you pay them
  • any employee who has worked for you in the current tax year (since 6th April) even if they have already left

Using the correct tax code

HM Revenue and Customs (HMRC) will send you:-

  • P9T form for any employees who need a new tax code
  • P9X form with general changes for employees whose tax code ends with an “L”

You should use the information new employees give you (usually their P45) to work out their tax code.

Update your payroll software

You should follow the instructions within the software to update your payroll software so it uses the latest rates and thresholds for Income Tax, National Insurance and student loan repayments.

HMRC Basic PAYE Tools

Versions 14.2.14330.88 and later of HMRC’s Basic Payroll Tools check for updates automatically (for example when the tax year changes or new rules come in).

If you are using a version before 14.2.14330.88 then you will have to download and install Basic Payroll Tools again.

Give Employees a P60

You should give a P60 to all employees on your payroll who are working for you on the last day of the tax year (5th April). The P60 summarises their total pay and deductions for the year.

You must give your employees a P60 by 31st May following the end of the tax year.

Reporting Benefits and Expenses

You can report expenses and benefits using your payroll software, if it has this feature. Any expenses and benefits must be reported to HMRC by 6th July following the end of the tax year.

You have to pay any Class 1A National Insurance due on the taxable expenses and benefits you have provided. HMRC must have received your payment by 22nd July (or 19th July if you are paying by post).

For further information on setting up payroll for the new tax year, please contact Stallion Accountancy Services.

About the author...

George Greer is an experienced ACCA qualified Business Owner with a demonstrated history of working in the accounting industry. He is skilled in Accounts and Finance Management, Budgeting and Business Planning with excellent knowledge of Sage and Xero Products. Strong professional with a BSc focused in Business Computing Systems from City University London.

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