Payroll year-end checklist: A complete guide for small businesses
With the end of the UK tax year on April 5th, businesses must ensure their payroll processes are accurate, compliant, and prepared for the new tax year. The payroll year-end is a critical period involving reconciling payroll data, submitting reports to HMRC, and gearing up for the next tax year. Failing to handle these tasks correctly can lead to penalties, employee dissatisfaction, and unnecessary stress. Whether you’re a small business owner or a multinational company, this payroll year-end checklist will ensure you’re fully prepared for the year-end and beyond.
Payroll year-end checklist
Following is the comprehensive payroll year-end checklist you need to consider:
1. Review and update employee data
Accurate employee data is crucial for a smooth year-end. Review and update the following for each employee:
- Personal details – Verify names, addresses, and National Insurance numbers.
- Tax codes – Ensure employees have the correct tax codes to avoid over or under-taxation.
- Statutory payments – Check records for maternity, paternity, sick pay etc to ensure correct processing.
- Benefits and deductions – Review benefits (e.g., company cars, health insurance) and deductions (e.g., pension contributions, student loans).
How an accountant can help
Accountants can perform a thorough audit of your employee data, identifying and correcting any errors or inconsistencies. They can also advise on complex tax code issues and ensure compliance with statutory payment regulations.
2. Reconcile payroll records
Reconciliation is essential to ensure accuracy. This involves:
- Comparing payroll totals – Match payroll records with your accounting system.
- Checking tax and NI contributions – Verify that the amounts deducted for income tax and National Insurance match what has been paid to HMRC.
- Resolving discrepancies – Investigate and resolve any inconsistencies.
How an accountant can help
Accountants are experts in reconciliation. They can quickly identify discrepancies, investigate their root causes, and implement corrective measures.
3. Process final payroll of the year
Your final payroll run of the year requires extra attention:
- Ensure timeliness – Process the final payroll on time to avoid delays in employee payments and reporting deadlines.
- Include all payments – Ensure all bonuses, overtime, commission payments, and other additional earnings are included in the final payroll.
- Holiday pay – Accurately calculate and process any outstanding holiday pay for employees.
How an accountant can help
Accountants ensure your final payroll run is processed accurately and efficiently, taking into account any specific circumstances like leavers’ payments or complex bonus calculations.
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4. Submit your final payroll reports
In the UK, employers must submit final payroll reports to HMRC by the relevant deadlines. These reports include:
- Full Payment Submission (FPS) – This is the regular payroll report submitted each pay period. Your final FPS for the year should include all payments and deductions up to the end of the tax year.
- Employer Payment Summary (EPS) – Use this to report any adjustments, such as statutory payments, advance payments, or reclaims, that weren’t included in your FPS. It’s also used to report periods of inactivity.
How an accountant can help
Accountants are intimately familiar with HMRC reporting requirements and deadlines. They can ensure your submissions are accurate and timely, avoiding penalties. They often use specialised software that integrates directly with HMRC systems, streamlining the process.
5. Prepare P60s for employees
A P60 summarises an employee’s pay and deductions for the tax year. Employers must provide a P60 to all employees who are employed on the last day of the tax year (5 April).
- Deadline – Issue P60s by 31 May.
- Accuracy – Double-check all information.
- Distribution – Provide P60s electronically or in paper form.
How an accountant can help
Accountants can generate and distribute P60s efficiently, ensuring accuracy and compliance with legal requirements. They can also answer any employee queries regarding their P60s.
6. Update payroll software
Ensure your payroll software is updated:
- New tax rates and thresholds – Reflect any changes announced by the government.
- Legislative changes – Incorporate updates to employment laws or reporting requirements.
How an accountant can help
Accountants stay up-to-date with all legislative changes and can advise you on how these changes affect your payroll processes. They might help with the latest software updates and configuration.
7. Plan for the new tax year
Once the current tax year is complete, prepare for the new one:
- Update employee records – Add new starters and remove leavers.
- Review payroll policies – Ensure alignment with new legislation or company changes.
- Communicate changes – Inform employees of any changes to their pay or benefits.
How an accountant can help
Accountants can help you plan for the new tax year by advising on upcoming legislative changes and their potential impact on your business. They can also assist with updating payroll policies and communicating changes to employees.
8. Back up your payroll data
Data security is paramount. Before the year-end, back up all your payroll data, including:
- Employee records
- Payroll reports
- Tax and NI Contributions
- P60 records
Store backups securely, either on an external drive, in the cloud, or both, to protect against data loss or cyber threats.
9. Stay informed about legislative changes
Tax and employment laws can change, so stay informed. Monitor announcements from HMRC regarding:
- New tax codes
- Changes to statutory pay rates
- Updates to reporting requirements
- National minimum wage changes
10. Seek professional advice if needed
Accountants offer invaluable support during payroll year-end:
- Expertise – They possess in-depth knowledge of payroll regulations, tax laws, and reporting requirements.
- Efficiency – They can automate many tasks using specialised software, saving you time and effort.
- Accuracy – Their expertise minimises the risk of errors and penalties.
- Compliance – They ensure your payroll processes comply with all relevant legislation.
- Peace of mind – They provide peace of mind, knowing your payroll is in expert hands.
Dates you need to remember
- April 5th – The 2024/25 tax year ends.
- Before April 6th – Update employee payroll records and payroll software.
- April 6th – The new tax year (2025/26) begins.
- April 19th – Final submission deadline for the 2024/25 tax year.
- April 22nd – Deadline for month 12 PAYE and online payment submission.
- May 31st – Deadline for providing P60s to employees.
- July 6th – Deadline for reporting expenses and benefits (often done through payroll software). It’s also the deadline for submitting P11D and P11D(b) forms.
- July 22nd – Deadline for HMRC to receive Class 1A National Insurance contributions for Benefits in Kind (or July 19th if not using digital systems).
Final thoughts
Payroll year-end can be complex and significantly more manageable with planning and the proper support. However, navigating the intricacies of payroll legislation and reporting can be challenging. Investing in professional accounting services for payroll management is an investment in peace of mind, allowing you to focus on your core business while leaving payroll complexities in capable hands. Schedule a free consultation with us to learn more about our payroll management services.
If you are a small business and want to save on tax, then contact Affinity Associates today for more best tax saving tips.
You can also call us at +44 20 8903 2077.
