Financial Year End
For a smooth and efficient financial year-end, you must complete various tasks like reviewing your employees' details and processing the final pay run. Our guide advises you on best practices to help you complete the full year-end process, ensuring compliance with HMRC requirements.
When preparing for payroll year-end, several vital tasks must be completed before submitting final reports to HMRC and transitioning to the new tax year. Having reliable payroll software is crucial for a smooth and efficient year-end process.
Before submitting your final reports, ensure you take the following steps:
- Review employees’ details:
Using your payroll software, check that your employees’ details haven’t changed. It is a good idea to ensure that changes are updated consistently throughout the year to ensure that details are correct for year-end.
- Review and manage leavers and new starters:
Ensure employees who have left the company or joined during the year are correctly processed and accounted for. Keeping track of leavers and new starters throughout the year will save time during year-end processing.
- Process your final pay run:
Before you complete your year-end, you must process your final pay run for the current tax year. Once this is complete, you can send your final Full Payment Submission (FPS) and, if required, your Employer Payment Summary (EPS) and record your P32 payment to HMRC.
- Complete the year-end process:
After sending the final FPS, use your payroll software to select the relevant tax year and proceed with the Year-End process. Submit your final EPS, which includes the year-end declarations, to HMRC. Once the EPS is submitted, you can make your final submission for the tax year.
By following these steps and investing in efficient payroll software, you can effectively navigate the year-end payroll process, ensuring accurate reporting, compliance with HMRC requirements, and a seamless transition to the new tax year.
After successfully processing your year-end, it is crucial to generate P60 forms for all your employees and ensure they are received by all employees by 31st May, as long as you still employ them on 5th April. As an employer, you are legally obligated to provide each employee with a P60, which outlines the tax they have paid on their salary throughout the tax year. The P60 serves as an essential document for employees to understand their tax contributions and can be used for various purposes, including tax return filing and financial planning.
Ensuring the timely distribution of P60 forms demonstrates compliance with legal obligations and enables your employees to assess their tax position accurately. By generating and providing these forms, you contribute to transparency in tax reporting and facilitate your employees’ access to crucial financial information.
In addition to providing P60 forms, you’ll need to issue P11D forms to employees who receive Benefits in Kind (BIK). Benefits in Kind include company cars, private healthcare, interest-free loans such as a train season ticket, or other similar perks. P11Ds are crucial in ensuring compliance and transparency in reporting employee benefits. These forms help HMRC accurately assess the tax liabilities associated with Benefits in Kind and ensure that employees’ tax obligations are met.
By issuing P11Ds, you report these benefits to HMRC. P11Ds must be filed by July 6th following the relevant tax year. For instance, in the tax year from April 6th, 2023, to April 5th, 2024, P11Ds should be filed by July 6th, 2024, to avoid any penalties for late submission.
Our comprehensive P11D guide provides further information on what should be included in P11Ds, including details on exemptions for business expenses. Understanding the specifics of P11Ds and related regulations will enable you to report Benefits in Kind and comply with HMRC requirements accurately.
If your workforce includes contractors, freelancers, or non-permanent employees, it is important to comprehend the tax implications and obligations associated with IR35, the UK’s anti-avoidance tax legislation. IR35 aims to ensure that individuals who are essentially functioning as employees, known as ‘disguised employees,’ pay the same tax and national insurance contributions as regular, payroll-based employees.
When engaging contractors and freelancers, it is vital to ensure that their employment status is correctly classified as “Outside IR35.” This means they operate as genuine independent contractors and are not deemed employees for tax purposes.
Understanding the intricacies of IR35 and its potential impact on you and your limited company is of utmost importance. By staying informed about IR35, you can ensure compliance with the law, avoid potential penalties, and maintain the appropriate tax treatment for your contractors and freelancers. Our comprehensive IR35 guide provides detailed information on this topic, helping you to navigate the complexities of the legislation, assess the impact of IR35 on your limited company and implement appropriate measures to meet your tax obligations effectively.