Posted on 31st March 2021
Whether you run payroll every week or month yourself or outsource the job to your accountant or bookkeeper, there are some things you need to do every year.
Here’s a checklist to help you get ready for the new tax year:
Submit your final payroll report
You need to send a Full Payment Submission (FPS) at the end of the tax year. The FPS tells HM Revenues and Customs (HMRC) about payments made to your employees and any deductions, such as National Insurance contributions (NICs) and income tax. You must include everyone you pay, even if they receive less that £120 each week. Your submission should be made on the normal pay day for your employees.
You will need your pay as you earn (PAYE) reference and your Accounts Office reference, which you will have received from HMRC when you registered as an employer.
Check your payroll records and tax codes
Your employee’s tax code tells you how much tax to deduct during the year, so it’s important to use the right one.
HMRC will normally contact you between January and March with any new tax codes to use for existing employees. You will normally receive a P9T form for any employee who will need a new tax code or a P9X form with general changes for employees whose tax code ends with an ‘L’. If you have taken on new employees their P45 form should tell you their tax code. If you receive a lot of tax code notices, you can use the HMRC’s PAYE Desktop Viewer to view, search and sort them.
There are updates every year for tax rates and thresholds for income tax, National Insurance and student loan repayments.
For 2021/22, the basic UK personal tax allowance will be £12,750.
The threshold for PAYE is £242 per week or £1,048 per month.
From 1 April, there will be increases to the National Living Wage, which has been extended to employees who are 23 and over.
Send P60s to your employees
Each employee’s total pay during the tax year is confirmed on their P60 form, along with any deductions that have been made. You must provide them with their P60 by 31 May.
Report expenses and benefits
You must tell HMRC about your employees’ expenses and benefits by 6 July using a P11D form. This should include all the benefits your employees receive such as a company car or mobile phone as well as expenses they can claim. The P11D(b) form will tell HMRC how much Class 1A National Insurance you need to pay on all the expenses and benefits you’ve provided.
Claim the Employment Allowance
You can claim Employment Allowance if you run a business or charity, including community amateur sports clubs, and your employers’ Class 1 National Insurance liabilities were less than £100,000 in the previous tax year. You can also claim if you employ a care or support worker.
This allows you to reduce your annual National Insurance liability by up to £4,000. You’ll pay less employers’ Class 1 National Insurance in each payroll run until you have used the £4,000 allowance or the tax year ends.
Please get in touch if you would like any advice about managing your payroll.
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