How to prepare for payroll year-end

We are approaching the end of the payroll year, which is 19 April.

Your processes should consist of just a month-12 or week-52 payroll with an extra step or two added to close the year.

Knowing what you need to get right is important. Get prepared for payroll year end with this article.

You must submit your final tax returns to HMRC by no later than 19 April 2023 for the 2022/23 tax year.

Ensure you provide P60s to your employees no later than 31 May 2023 as part of preparing for the new tax year.

1: Determine the end date of your payroll

In some cases, your payroll may not end on week 52, requiring an additional payroll. In this case, your payroll will end on week 53, or possibly 54, or 56.

Two conditions must be met for this to happen:

a: The payroll is processed weekly, twice weekly, or four times a week (monthly payrolls are not processed).

b: In any year, your payroll date is 5 April (or 4 April if it's a leap year—2024, 2028, etc.).

Payrolls that run monthly are always limited to 12 months. This means there will never be a month 13, so you can skip this section and run payroll as usual.

You can skip ahead if your payroll is run after 5 April.

The payroll ends on April 5, depending on whether you pay weekly, biweekly, or four-weekly:

• Weekly payroll falling on 5 April: A week 53 payroll (5 April to 11 April)

• Two-weekly payroll falling on 5 April: A week 54 payroll (5 April to 18 April)

• Four-weekly payroll falling on 5 April: A week 56 payroll (5 April to 2 May)

The extra payroll will need to be transferred to a week one tax code if you are affected by this.

In most cases, payroll software will do this automatically, but it's a good idea to check. In the absence of an amendment to the tax code status, most employees will pay too much tax.

You should adjust the tax code again once the new payroll year begins (see Step 6, below).

2: Check for leavers or new starters

Now is the time to make sure that employees who left or were hired during the past year have been processed. It might mean talking with managers and making sure communication lines are open.

Make sure everything has been covered at the end of the year and that no one has been missed.

Do this before you submit your final Full Payment Submission (FPS) or Employer Payment Summary (EPS).

3: Complete the final pay run

In order to run your year end, you must complete your final pay run for the 2022/23 tax year.

Your last payroll of the tax year has been processed and any relevant employee leavers have been made. EPS and FPS can now be sent, if necessary. There is a deadline of 19 April for this.

The P32 payment to HMRC must also be recorded.

FPS and EPS don't differ in the final pay period. Proceed with payroll year end after submitting them as normal.

The key to avoiding errors that require retrospective adjustments is to avoid them as much as possible. Any adjustments required after 19 April will require additional FPSs or EPSs.

In the past, retrospective adjustments were done through an Earlier Year Update (EYU), but this is no longer used.

4: Complete your year-end tasks

Select the year end screen on your payroll software and submit your final EPS to HMRC at the end of the tax year.

The final submission differs from the normal EPS submissions you send HMRC on a monthly or quarterly basis.

End-of-year declarations will be included in your final EPS submission. You will also see the date when your business ceased to operate, if applicable.

For the 2022/23 tax year, you can now process your year-end.

You can now produce your P60s once this step is complete.

5. Preparing your P60s

Your employees who worked on 5 April need to receive a P60 from you by 31 May if they worked on the last day of the tax year.

As a result of the Intermediaries Legislation (IR35), you have deemed employees on your payroll.

Following year end, this is perhaps the final task they need to complete to summarize their pay and deductions.

As with payslips, you can securely share P60s with your employees using your payroll software.

If you need to print them off, you can do so.

It may be tempting to create the P60 as soon as possible, but it should be done after the final payslip has been issued, plus the usual time for employees to provide feedback.

6: Start your new payroll year by checking the P9X

Payroll professionals often view closing one tax year and opening the next as one process.

Nowadays, the new year checklist is longer than the year end checklist.

In other words, you need to refer to the P9X right away after closing off and before you start your first payroll for the month (or week).

Employers are required to change or carry forward tax codes on 6 April according to the P9X document published by HMRC.

The documentation of software vendors summarizes this information, so that could be another place to look before the first payment runs.

Information should be sourced primarily from government websites.

As part of the new payroll year's work, other thresholds for student loans and postgraduate loans will be checked.

Payroll must do the following manually:

• It is necessary to renew CA2700 certificates if someone has deferred National Insurance contributions (NICs) before you can process pays for the new tax year using the deferred National Insurance contributions (NICs) insurance category letter.

• It is important to review childcare vouchers to ensure the value they are eligible for does not need to be adjusted. If you have received childcare vouchers since 6 April 2011, you have to complete a Basic Earnings Assessment (BEA) as part of the PAYE process.

Dates to be aware of when it comes to payroll year end

These key dates around payroll year-end have been highlighted above, but here they are again along with some other payroll dates you should know.

If you don't already have them on your calendar, add them:

5 April

• The 2022/23 tax year ends on this date.

Before 6 April

• Update your employee payroll records.

• Time to update your payroll software.

6 April

• The new tax year (2023/24) begins.

19 April

• This is the deadline for the final submission of the 2022/23 tax year.

22 April

• This is the deadline for month 12 PAYE.

By 31 May

• Your employees need to receive their P60s by this date.

By 6 July

• You need to report expenses and benefits; you may be able to use your payroll software to do this.

6 July

• This is the deadline to submit your P11D and P11D(b) forms.

22 July

• On this date, payment of class 1A National Insurance contributions on Benefits in Kind must be with HMRC (note that 19 July is the deadline if not using digital systems).