How to Handle Your Payroll at the End of the Year

As we wind down another financial year, businesses across the UK must start turning their attention towards wrapping up their payroll.

The end of this period isn’t just a time for resolutions and reflections on your business performance across the last twelve months; it's also a key period for ensuring your payroll is as tidy and accurate as possible.

Here at Blue Rocket Accounting, we have worked with many clients across many industries and have seen first-hand the problems not being prepared for the end of the tax year can cause.

In this blog, we’re going to guide you through the nitty-gritty of managing your year-end payroll smoothly, keeping you compliant and your employees happy.

Let’s take a look.

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Understanding Year-End Payroll in the UK

Year-end payroll isn’t just about closing books; it’s acritical process that ensures you're meeting your legal obligations and preparing your business for the new tax year starting on 6th April.

This process includes verifying employee information, ensuring all payments and deductions are correctly recorded and reporting to HM Revenue and Customs (HMRC).

It’s your chance to correct any discrepancies and update records, ensuring a seamless transition into the new fiscal year.

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Preparing for Year-End Payroll

Here are some of the key processes you should look to carryout in this time period.

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Review Employee Information

First things first, ensure all your employee details are up to date.

This includes addresses, National Insurance numbers, and correct tax codes.

Incorrect information can lead to issues with HMRC and potentially upset your employees if their personal details are wrong on important documents like their P60s.

This can affect their wages by leading them to pay too much tax and cause major issues so this is a great time to have a good look through and ensure everything is listed as it should be.

Check Your Payroll Records

Accuracy here is key.

Review the year’s payroll records to ensure all payments, deductions, and leave balances are correctly recorded.

This is also a good time to reconcile your payroll with your accounts, ensuring everything matches up perfectly.

Understand Your Legal Obligations

You're not just tidying up; you're complying with the law.

You must provide P60s to all employees on your payroll by the 31st May deadline and report to HMRC about the previous tax year’s final payroll.

Ignorance isn't bliss when it comes to HMRC, so ensure you’re well-versed in what’s expected.

Keeping up to date with the latest regulations is vital and if you don’t have time to do your research, outsourcing is always a good idea so you can be sure to stay on top of things.

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Key Deadlines and Dates

Mark your calendar for critical deadlines.

The most important date is the 19th April, by when you should have completed and submitted your final Full Payment Submission (FPS) if you’re paying employees on the last day of the tax year.

Also, remember the P60 distribution deadline on 31st May. Missing these deadlines can lead to penalties, so it's best to act early and always be well prepared in advance so you’re not rushing towards the end of the deadline as this can lead to mistakes.

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Completing the Year-End Report (P35 and P14)

The final FPS is crucial as it signals to HMRC that you’ve made your last payroll submission for the year.

For most, payroll software automates much of this process, but it’s vital to ensure all information is accurate before submission.

If you've made any errors during the year, now is the time to correct them through an Earlier Year Update (EYU).

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Issuing P60s to Your Employees

The P60 is a summary of an employee's total pay and deductions for the year.

It's essential for employees' personal records, especially for those applying for loans or benefits.

Ensure these are distributed by the 31st May deadline.

With the rise of electronic P60s, this process has become more straightforward, but it's still important to ensure every employee receives theirs.

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Common Mistakes to Avoid

A few common errors can turn the smooth sailing of year-end payroll into a bit of a nightmare.

These include incorrect tax codes, late submissions, and reporting errors.

Double-check your work and use HMRC’s resources to verify you’re on the right track.

Preparation and attention to detail are your best defences against these pitfalls, as well as good organisation and record-keeping throughout the year.

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Planning for the Next Tax Year

Budgeting for Tax and National Insurance Changes

Stay informed about any changes to tax rates, thresholds, and National Insurance contributions.

These changes can affect your budgeting for the next year, so it’s crucial to incorporate them into your financial planning as early as possible.

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Updating Payroll Software and Processes

Check for updates to your payroll software that might include changes in legislation or tax rates. It's also a good time to review your payroll processes.

Perhaps there’s room for improvement or efficiency that you can carry into the new tax year.

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Where to Find Help

Utilising HMRC Resources

HMRC offers a wealth of guides, tools, and helplines designed to assist you through the year-end process.

Don’t hesitate to use these resources to ensure you’re meeting all your obligations correctly.

Considering Professional Payroll Services

If you find the process overwhelming or if your business is growing, it might be time to consider professional payroll services.

These services can take the burden off your shoulders, ensuring everything is handled correctly and freeing you up to focus on other areas of your business.

Here at Blue Rocket Accounting, we have a team of experienced accountants ready to help you with all of your payroll needs, no matter how big or small your business is.

This means we can handle all of the research and administrative tasks so you don’t have to.

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Blue Rocket Accounting

Handling your payroll at the end of the financial year is a significant task, but it’s far from insurmountable.

With careful planning, attention to detail, and a proactive approach, you can ensure a smooth transition into the new tax year.

Start early, stay organised, and remember that help is always available.

If you are finding getting your payroll in order stressful, or need an extra helping hand, then why not get in touch with Blue Rocket Accounting today?

We can take control of your process, ensuring compliance and efficiency every time.

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