Payroll Year-End (Ultimate Guide 2023/24)

Need a brush up before navigating the busiest time of the year for payroll professionals?

Whether you're a seasoned payroll manager or spinning many other plates in addition to payroll, we'll make sure you leave no stone unturned when it comes to wrapping up payroll for the tax year and getting yourself ready for the 6th April.

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The basics: when is payroll year-end?

The tax year ends on the 5th of April each year, and starts again on the 6th of April.

There are also some other key dates that's essential to keep track of throughout the tax year...

Some of the most crucial dates tend to be around the beginning and end of the tax year.

Key dates to keep track of

Below are some important dates to remember to ensure you have a smooth payroll year-end:

• 5th April – End of tax year
• 19th April – End of tax year filing deadline
• 31st May – Deadline to provide employees with P60s
• 6th July – Deadline to report benefits (P11D and P11D(b))
• 6th April – Beginning of tax year

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Preparing for payroll year-end: here's what you need to do

Update employee records

📚 Quick definition: When we talk about 'employee records' we just mean any information and documentation related to each individual employee - names, addresses, employment details, salary, benefits tax codes etc.

Check for leavers or new starters: If there have been new hires, ensure their information is added to the payroll system. And for terminated employees, be sure to update records accordingly.

Tax Code updates: Check for any updates to HMRC tax codes and adjust employee records where necessary.

Pension contributions: Make sure pension contribution details are up to date. Update records for any changes in pension contributions, especially if the employee has opted for adjustments.

Holiday and Leave Balances: Review holiday and leave balances for each employee (an automated solution like Pento will integrate with your HR software to pull this data through for you).

Bonuses and overtime: Update records for any bonuses or overtime payments.‍

🗓 Deadline: Before making final pay run.

Send your final Full Payment Submission (FPS)

📚 Quick definition: A Full Payment Submission is a detailed report submitted to HMRC providing real-time information about employees' earnings, tax, and National Insurance contributions. It's typically submitted every time you make a payment to an employee.

If you’ve been running payroll throughout the year, you will be aware that the Full Payment Submission needs to be submitted every single time you pay your employees...

And at the end of the tax year, you'll need to send your last FPS either on or before your employee's last payday of the tax year, just like you would for any other month.

Your FPS will let HMRC know about all of the payments and deductions you've made over the course of the year.

You can do this using your payroll software - just be sure to select ‘Yes’ in the ‘Final submission for year’ field in whichever software you're using.

This is to let HMRC know that this is the final submission for the tax year - so they won't be expecting any more.

Here's what you need to do to get your final FPS submission done:

• Include all employees who got paid in the tax year (regardless of the amount)
• Include all employees who were paid in the tax year, even if they've since left
• Make sure you select ‘Yes’ in the ‘Final submission for year’ field
• Submit before your final payday 

💡 If you run more than one payroll under the same PAYE scheme reference, just be sure to include the end-of-year information in your final report.

🗓 Deadline: 19th April

Submit your Final Employer Payment Submission (EPS)

In some cases you may need to submit an Employment Payment Summary as well as an FPS.

📚 Quick definition: Employer Payment Summaries are submitted if there are any payments to be recovered such as statutory payments or apprenticeship levy.

Here are some scenarios in which an EPS might be needed:

• If you forgot to put ‘Yes’ in the ‘Final submission for year’ field when submitting your FPS
• If your payroll software doesn't have a ‘Final Submission for year’ field
• If you didn't pay anyone in the final pay period of the tax year
• If you sent your final FPS early and then didn't  pay any employees for at least one full tax month in the last tax year.

If you're submitting an EPS relating to Month 12 of the tax year (6th March - although Month 12 can spill into 5th April) and you're submitting after your final FPS, you'll need to mark the EPS as final - the same as you would for the FPS submission.

🗓 Deadline: 19th April

Prepare and send employees their P60s

📚 Quick definition: P60s are documents used to summarise an employee's total pay and deductions for the year - a summary of all the payslips they receive over the course of the year.

Every employee you have working for you on the final day of the tax year will need to get a P60 by 31st May.

Most payroll software should allow you to generate and send P60s, similarly to how you would usually send payslips...

And you can also print them off manually if you’re exempt from running your payroll online (order your P60 forms directly from HMRC here).

Although this may be obvious, it's worth quickly noting that you shouldn’t send your employees P60s until the final payslip has been issued, so that this payslip can be included in the P60 form.

🗓 Deadline: 31st May

Report on expenses and benefits

P11Ds

📚 Quick definition: P11Ds are forms that employers have to submit to HMRC on behalf of every employee. They include details of taxable benefits like company cars, accommodation or other benefits provided which were not reported previously on payroll or via a PAYE Settlement Agreement.

At the end of each tax year, you'll need to submit a P11D form to HMRC for every employee you’ve given expenses or benefits to.

This only applies if benefits aren’t payrolled. You don’t need P11Ds if you report benefits throughout the year via payrolling.

We'd recommend sending the document to your employees so they can quickly double check that everything is accurate before you send them off to HMRC. You may also want to hold onto a copy of the P11Ds to make record keeping a bit easier.

You can usually submit P11Ds through your payroll software.

Here's what the reporting process looks like in Pento:

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🗓 Deadline: 6th July

P11D(b)s

📚 Quick definition: P11D(b)s are used to report the amount of Class1A National Insurance Contributions due on certain benefits that have been paid to employees. This form is submitted per company on a yearly basis, and it outlines the total value of benefits that are subject to Class1A National Insurance and the sum due from the employer.

Submitting a P11D(b) will let HMRC know how much Class 1A National Insurance you need to pay on any expenses and benefits you’ve given your employees.

So if you submit any P11Ds or payroll benefits, this means you'll also need to submit a P11D(b) too.

💡 If you're payrolling benefits, you don't need to submit P11Ds... but you will still need need to submit a P11D(b) form.

🗓 Deadline: 22nd July (or 19 July if you’re paying by cheque).

Calculate National Insurance for directors

📚 Quick definition: Directors' NICs are calculated differently from employees, as they are subject to a specific set of rules. Directors often receive a combination of salary and dividends, impacting their NIC liability.

When calculating National Insurance Contributions (NICs) for Directors, there are a few factors to take into consideration that are unique to directors.

Directors who choose  the 'standard' or 'cumulative' method of calculating national insurance can track NI payments fairly easily. These methods will automatically calculate NI based on payments made over the year.

And for Directors using the 'alternative' or 'non-cumulative' method,  you'll need to recalculate their NI before the end of the tax year.

The calculation should include their total NIable pay for the entire year.

If you find that there wasn't enough NI deducted from their yearly earnings, they'll be given a chance to pay up in Month 12.

Or if they paid too much, the extra amount will be refunded.

🗓 Deadline: 19th April (submitted in FPS)

Don't forget your Pay As You Earn (PAYE) Payment

📚 Quick definition: Payments must be made to HMRC to pay over any PAYE that has been deducted from employees’ earnings.

As you probably already know, PAYE payments need to be made every month and are not specific to year-end payroll...

But your PAYE payment is definitely worth making a note of so that it doesn't get forgotten about with so many other tasks to get done before the new tax year.

🗓 Deadline: 22nd April if paying electronically, 19th April if paying by cheque 

Final note: double check for any updates to HMRC guidelines

Although payroll software like Pento will help you stay on top of any legislation changes, you may still want to check for any changes in tax codes, allowances, or reporting requirements.

You can see any major changes that might affect how you do payroll via HMRC's employer bulletins.

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Preparing for the new tax year: what are the key tasks?

Check your PAYE Settlement Agreement (PSA)

📚 Quick definition: A PAYE Settlement Agreement is a formal arrangement between employers and HMRC that allows employers to settle the tax and NICs on certain types of expenses and benefits. The purpose of a PSA is to simplify the tax treatment of these items and reduce the admin burden for both employers and employees.

If your employees receive minor, irregular or impractical benefits, you might be able to report them under a PSA, where you would pay the tax and National Insurance on behalf of employees related to these benefits. You can find out more about PSAs here.

If you're planning to apply for a PSA or make changes to it, you'll want to do this prior to the start of the tax year to make reporting any of these benefits easier.

Already have a PSA? Then you may want to just check that all relevant benefits are included.

Look for any changes to the National Minimum and Living Wage 

📚 Quick definition: The National Minimum Wage (NMW) and the National Living Wage (NLW) are statutory minimum wage rates set by the UK government to ensure that workers receive a fair and legal level of remuneration for their work.

On the1st April each year, the National Minimum Wage (NMW) and National Living Wage (NLW) rates change.

And they also change on your employees' birthdays if their age qualifies them for a new NMW bracket.

This means you'll also need to uplift an employee's hourly rates to match the rates to their age.

💡 NMW applies to employees up to 22, while NLW applies to employees aged 23 and over (this will be changing in April 2024 to be applicable from age 21 and over) 

For the 2024/25 tax year, The National Living Wage (NLW) is getting a bump of 9.8%, taking it to £11.44/hour for workers on low pay.

National Insurance (NI) will be cut by over 15%, which will take effect from January.

This will save UK employees earning an average salary around £450 a year.

You can also check them out via HMRC's website.

💡 Apprentices aged 19 or under, as well as those in the first year of their apprenticeship, are entitled to an apprentice rate of pay. After the first year, they should receive NMW for their age. 

Check the P9X and update tax codes

📚 Quick definition: The P9X is a HMRC document that explains how to uplift personal allowances if applicable.

Before you start your first monthly or weekly payroll for the new tax year, you'll need to check the P9X.

HMRC will send you a P9X form that contains any changes for employees with tax codes ending in ‘L'.

The L code usually means an employee is entitled to the standard tax-free Personal Allowance.

If the standard personal allowance has been changed, you'll need to ensure that tax codes are updated accordingly.

You can check HMRC's P9X tax codes here

If your employees have not been given a new tax code, you’ll need to remove any Week 1 / Month 1 indicator from the tax codes carried over into the new tax year.

Stay on top of rates and thresholds

📚 Quick definition: These rates and thresholds dictate deductions from employees' salaries. 

You'll want to make sure whatever payroll solution you're using is synced up with the latest updates to tax thresholds, NI thresholds and rates as well as Student Loan and Post-Graduate Loan thresholds and recovery rates.

• Tax thresholds: be mindful of any changes to tax bands, such as the basic, higher, and additional tax rate bandings.
• NI thresholds and rates: National Insurance becomes payable when it reaches particular thresholds and at different rates, depending on your NI category. These may vary each tax year, so ensure you stay informed (and ideally use payroll software that can help you keep up.)
• Student Loans and Postgraduate Loans: the point at which student and post-grad loans become repayable can vary from year to year, as can the rates for repayment.

💡 The UK government has stated that the Personal Allowance, the basic rate limit and various NICs thresholds are going to stay at their current levels until 5th April 2028.

Want to avoid excessive employee queries?

Be aware of any changes in regulations that may affect your employees' net pay.

If the Student Loan threshold is raised, for example, an employee that was already close to the threshold in March could find themselves no longer making repayments in April due to their pay dropping beneath that limit.

For the 2024/25 tax year, The Department for Education has confirmed the Student Loan thresholds for Plan Type 1 and 2 to be operated from 6th April 2024.

From 6 April 2024, the repayment threshold for pre-2012 (Plan 1) loans will rise to £24,990.

The income threshold for post-2012 (Plan 2) from April 2024 will remain frozen at £27,295.

Check your eligibility to claim employment allowance

📚 Quick definition: The employment allowance is a yearly perk that enables employers to reduce their Class 1A National Insurance contributions.

Are you eligible to claim the employment allowance perk? Here's HMRC's criteria:

• If you're a business or charity (including community amateur sports clubs) and if your employer’s Class 1 NI liabilities were less than £100,000 in the last tax year.
• If your business is not linked to any other organisation (here's what constitutes a 'connected company')

💡 If you qualify, don’t forget to flag this on your first EPS to HMRC at the start of the new tax year and inform them which sector you belong to.

Split the Apprenticeship Levy Allowance

📚 Quick definition: The Apprenticeship Levy is a policy the UK government introduced to help promote apprenticeship programmes. It's essentially a sum of money that needs to be paid by employers to help fund apprenticeship courses - (0.5%) of their payroll costs.

If you're responsible for running payroll, chances are you already know that companies have to pay apprenticeship levy if they meet the £3 million annual bill threshold.

But what you might not know is that you might be able to use the £15,000 allowance to offset this.

And if you are connected to another company you can split the £15,000 allowance.

You can report on your Apprenticeship Levy each month using your EPS (payroll software like Pento will allow you to do this).

Payroll year-end checklist

• Check leavers and new starters: Process them before submitting FPS or EPS.
• Calculate National Insurance for directors: for Directors using the 'alternative' or 'non-cumulative' method, you'll need to recalculate their NI before the end of the tax year.
• Process your final pay run: you'll need to run payroll before you can get into the year-end reporting
• Send final last FPS (or EPS) to HMRC: This needs to be done on or before your employee's last payday of the tax year
• Report your expenses and benefits: submit your P11Ds/P11D(b)s
• Send P60s: Employees working on the final day of the tax year will need a P60
• Remember your PAYE payment: This can be easily missed, so make a note

Start of tax year checklist

• Check for tax code changes: you can do this via HMRCs P9X
• Update rates and thresholds: make sure your payroll software is updated with the latest updates to tax thresholds, NI thresholds and Student Loan/Postgraduate Loan thresholds and recovery rates.
• Claim Employment Allowance (if eligible): add this to your first EPS to HMRC at the start of the new tax year if you qualify
• Split Apprenticeship Levy Allowance (if eligible): report on your Apprenticeship Levy each month via your EPS
• Check your PAYE Settlement Agreement (PSA): If you're applying for a PSA or making changes to it, you'll want to do this before the new tax year starts
• Check National Minimum and Living Wage: NLW is going up to £11.44/hour for workers on low pay.

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Integrate with your favourite software

Pento will connect with your HRIS, accounting systems, time and attendance systems or  pension providers to keep the data flowing smoothly.

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Payroll year-end FAQ

What should you do for payroll year-end?

Key tasks include:

• Checking leavers and new starters
• Sending final last FPS to HMRC
• Submitting your P11Ds/P11D(b)s
• Send P60s to employees 

What is the payroll tax year in the UK?

Here in the UK, the tax year ends on 5th April and starts again on 6th April.

Payroll year-end submission deadline

The payroll year-end submission deadline is typically on or before April 19th. You'll need to submit your final payroll report (including the Final Full Payment Submission) to HMRC by this deadline.