Payroll Year End can be a stressful time for Payroll teams. There’s normally a flurry of activity around the April 5th deadline. As one tax year ends and the other begins there’s several things Payroll teams need to make sure they do so they stay compliant and within the law.
Juggling P60s, Full Payment Submissions (FPS) and Employer Payment Submission (EPS) isn’t easy and when you add new payroll legislation into the mix, you can begin to see why Payroll Year End is a hectic time for many Payroll teams.
Luckily, we’ve put together this handy blog post that lays out the basics you need to remember to successfully complete year end payroll. We’ve also detailed the biggest legislative changes coming in 2022 and what you’ll need to do to prepare for them.
Payroll year end is just around the corner but don’t worry, we’ve got you covered. Everything in this blog should give you all the information you need to run year end payroll and help you streamline your processes around the April 5th deadline.
What is Payroll Year End?
To put it simply, Payroll Year End is when your Payroll Department sends over the final versions of your company’s Full Payment Submission and Employer Payment Submission to HM Revenue and Customs (HMRC).
The main purpose for sending these documents over to HMRC is to report on your previous tax year. Payroll Year End is also when you should be sending your employees’ their P60s and you should also be preparing for the new tax year which starts on April 6th.
Payroll Year End timeline
There’s a lot that needs to be done at Payroll Year End and sometimes it can be difficult to keep track of all the deadlines you need to stick to. Below we’ve listed the key dates you should bear in mind when you’re approaching April and Payroll Year End.
- Before April 6th: On or before your employees’ last payday before the new tax year you need to make sure you send your final FPS payroll report of the year.
- From April 6th: Once the new tax year starts there’s several things you’ll need to do. Update all your employee payroll records, make sure all your payroll software is up to date and if you want to continue claiming employment allowance in 2022/23 you must send an EPS to HMRC indicating your intentions.
- By 31st May: You must give your current employees their P60s
- By 6th July: You need to report your employees expenses and benefits if they aren’t being processed through payroll
- By 22nd July: You must have paid Class 1A NIC on P11D benefits
Legislative changes for payroll in 2022
With a new tax year comes new legislative changes and rules that Payroll teams will need to follow. Below we’ve highlighted several that are likely to affect businesses no matter their sector or industry.
Health and Social Care Levy
From April 2022 a new UK-wide health and social care levy of 1.25% is coming into force. This will see an increase in employees’ national insurance contributions (NICs) and will apply to all working-age employees, self-employed and employers. It will effectively increase everyone’s National Insurance contribution by 1.25%.
For businesses employing apprentices under the age of 25, people under the age of 21, veterans and those employees won’t pay the levy as long as their yearly gross earnings are less than £50,270.
New National Insurance category letters
2022 will also see the introduction of several new national insurance category letters for veterans, freeport employees etc. These can be included in your Full Payment Submissions (FPS). The new letters are:
- F – Freeport standard category letter
- I – Freeport married women & widows entitled to pay reduced NICs
- S – Freeport employees over the state pension age
- L – Freeport employees who can defer paying 12% and pay only 2% because they are already paying it in another job
- V – veterans
Additionally, if the Self Assessment Unique Taxpayer Reference (SAUTR) is present, your Company Tax Reference (COTAXREF) must be absent; however, most payroll software will automatically stop you from doing this.
2022 National Living Wage (NLW) and National Minimum Wage (NMW) is increasing
With fuel and the cost of living increasing in 2022 the government has stepped in to up the UKs national minimum wage and national living wage to help people who might be struggling to make ends meet due to fuel and price rises.
If your company employs people who work on the minimum or living wage then these increases could affect your bottom line. It’d be wise therefore to take note of these rises long before they come into force and plan accordingly.
Below is a table showing you the increases to the living wage in 2022.
| Rates from April 2022 | Current Rate (April 2021 to March 2022) | Increase | |
| National Living wage | £9.50 | £8.91 | 6.6% |
| 21-22 Year Old Rate | £9.18 | £8.36 | 9.8% |
| 18-20 Year Old Rate | £6.83 | £6.56 | 4.1% |
| 16-17 Year Old Rate | £4.81 | £4.62 | 4.1% |
| Apprentice Rate | £4.81 | £4.30 | 11.9% |
Are you prepared for Payroll Year End?
If your Payroll team is gearing up for payroll year end and you want to make sure you get everything done in time Phase 3 can help. We’re payroll specialists that offer a range of managed payroll services to help Payroll teams of all sizes streamline their processes, reduce errors and complete their tasks faster. To find out how we can help you contact us here.
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