By hayley - In this article, I’ll outline everything you need to consider for the UK payroll year-end, along with best practices and tips to help you avoid common pitfalls and keep your business compliant.
What is Payroll Tax Year-End?
In the UK, the tax year runs from 6th April to 5th April of the following year. Payroll tax year-end refers to the process of wrapping up your business's payroll for the current tax year. During this period, employers need to:
- Finalise employee payroll for the tax year.
- Submit year-end reports to HMRC.
- Distribute important documents like P60s to employees.
- Ensure payroll systems are updated for the new tax year.
Completing payroll year-end accurately and on time is essential to avoiding penalties and ensuring a smooth start to the new tax year.
Key Steps for Payroll Tax Year-End
- Process Final Payroll for the Tax Year
The first step is to run the final payroll for the current tax year. This includes processing any last payments to employees and ensuring all deductions and National Insurance contributions are accounted for. Before submitting your final Full Payment Submission (FPS) to HMRC, review the payroll data to ensure it is accurate and complete. Calculate your Directors NI to ensure it’s calculated correctly on the annual method.
- Submit the Final FPS and Employer Payment Summary (EPS) to HMRC
Once the final payroll is processed, you need to submit your final FPS for the tax year to HMRC. The FPS provides details of your employees' pay, tax, and National Insurance contributions for each pay period. If you've claimed any statutory payments (such as Statutory Sick Pay or Maternity Pay) or if adjustments are needed, you’ll also need to submit an Employer Payment Summary (EPS).
Be sure to mark the final submission as the "Final Submission for the Tax Year" in your payroll software. The deadline for submitting your final FPS is 19th April, following the end of the tax year.
- Distribute P60s to Employees
After submitting your final FPS, you must issue P60 forms to all employees who were on your payroll on the last day of the tax year (5th April). The P60 summarises the total pay, tax, and National Insurance contributions for the year. It’s a vital document for employees as they use it to complete self-assessments or provide to lenders.
Employers must distribute P60s by 31st May, and you can provide these either electronically or in paper form.
- Report Employee Benefits and Expenses (P11D)
If your business provides employees with benefits in kind, such as company cars or private medical insurance, you must report these to HMRC using a P11D form (this is due to be changing to payrolling of benefits from April 2026). Additionally, you’ll need to submit a P11D(b) form to report the Class 1A National Insurance contributions due on those benefits. The deadline for submitting these forms is 6th July.
It’s important to gather all the necessary information about benefits and expenses throughout the year to ensure accurate reporting.
- Update Payroll Software for the New Tax Year
Before you process the first payroll for the new tax year, ensure your payroll software is updated with the latest tax codes and National Insurance thresholds. HMRC can issue new tax codes for the upcoming year (although the emergency tax code remains the same for tax year 2025-2026), and you’ll need to apply these to your payroll system. Be sure to check for any other changes in payroll legislation that might affect your business, such as adjustments to minimum wage rates or pension contribution requirements.
Best Practices for Payroll Tax Year-End
- Start Early
Preparing for payroll tax year-end shouldn’t be left to the last minute. Begin gathering the necessary information well in advance so that you can complete the process calmly and accurately. Early preparation gives you time to reconcile payroll data, check for errors, and resolve any outstanding issues.
- Regularly Reconcile Payroll Data
Throughout the year, regularly reconciling your payroll records with HMRC submissions can help identify any discrepancies early on. This ensures that your year-end payroll data is accurate and reduces the risk of having to make corrections at year-end.
- Automate Year-End Reporting with Payroll Software as far as possible
Payroll software is invaluable for automating much of the year-end process. Many systems can generate year-end reports, submit the final FPS, and create P60s automatically. By using payroll software, you’ll reduce the risk of errors and save valuable time. Make sure your payroll software is compliant with HMRC’s Real Time Information (RTI) reporting requirements.
- Review Employee Benefits and Deductions
Be sure to review all employee benefits, such as company cars, pensions, and health insurance, as these can affect your P11D reporting. Ensuring these are tracked accurately throughout the year will simplify year-end reporting.
Tips and Tricks for a Smooth Payroll Year-End
- Double-Check Employee Details
Make sure that all employee details are up-to-date before submitting the final FPS. This includes National Insurance numbers, addresses, and tax codes. Mistakes in employee information can lead to delays in processing or errors in their P60s.
- Use HMRC’s Online Tools
HMRC provides various online tools to help employers with payroll tax year-end. These tools can help you check tax codes, calculate National Insurance contributions, and ensure that your submissions are accurate.
- Communicate with Employees
Employees will need their P60 forms to complete their tax returns or provide to mortgage lenders. Let your employees know when and how they’ll receive their P60s, and encourage them to review the information carefully to ensure there are no discrepancies.
- Track Deadlines
Missing deadlines can result in penalties from HMRC. Key dates to remember include 19th April (final FPS submission), 31st May (distribution of P60s), and 6th July (P11D and P11D(b) submission). Consider setting reminders to ensure you meet all obligations on time.
- Plan for the New Tax Year
Take the opportunity to review your payroll processes and systems ahead of the new tax year. Are there any inefficiencies that can be addressed? Would it be beneficial to implement new software or update internal payroll policies? A little planning now can save a lot of time in the future.
Conclusion
The payroll tax year-end in the UK is a critical period for businesses to ensure compliance with HMRC and provide employees with accurate year-end documents. By starting early, reconciling payroll data regularly, and following best practices, you can avoid penalties and ensure a smooth transition into the new tax year.
Investing in the right payroll software or payroll support, staying on top of deadlines, and keeping employees informed are all key to a successful payroll year-end. With careful planning and attention to detail, you’ll not only meet your legal obligations but also set the stage for an efficient payroll process in the year ahead.
Hayley