Preparing for payroll year-end: A comprehensive checklist

As the end of the tax year approaches, businesses need to prepare for payroll year-end.

This process involves reconciling payroll for the year, issuing tax documents to employees, filing necessary returns and preparing for the new tax year.
This could be relatively straightforward for small teams, or exceptionally complex if you employ multiple people, provide benefits like company cars, and so on.

Read on to learn how to finalise your records, report expenses and benefits, submit forms to employees and HMRC, and more.

1. Review employee information and payroll records

First, ensure that personal details such as names, addresses, tax codes, and national insurance numbers are current and correct.

Even minor inaccuracies can lead to reporting errors and potential compliance issues with HMRC.

Time spent verifying this information upfront prevents the need for corrections down the line. Planning and checking ahead is always easier than backtracking.

Then, after checking initial details and before submitting any year-end reports, you’ll need to check all payroll records are accurate. This involves reviewing all payments, deductions, and contributions made throughout the year.

Key points to consider:

Conduct a thorough review of all employee records for accuracy.
Update any changes in personal details immediately.
Regularly check for updates in tax codes and apply them to employee profiles.
Engage with employees to confirm their details, encouraging them to report any changes.
Reconcile payroll figures with bank transactions to ensure accuracy.
Review all deductions and contributions for compliance with current regulations.
Address discrepancies as soon as they are identified to avoid year-end complications.

2. Prepare and submit P60 forms

By 31 May each year, employers must issue P60 forms to all their employees.

The P60 form includes an array of essential information, such as the employee’s name, National Insurance number, tax code, and total taxable pay.

It also details deductions made from the employee’s salary, including income tax, National Insurance contributions (NICs) pension contributions, and student loan repayments.

Essential actions:

Create your P60 forms well before the deadline to allow for review.
Double-check the accuracy of the information on each P60 against payroll records.
Distribute P60 forms to employees promptly, preferably with clear instructions on how they might use this information for their tax returns.

Complete and file P11D forms

When employees receive benefits in kind, such as company cars, private health insurance, or other non-cash benefits, these need to be reported on P11D forms.

The employer is responsible for completing and submitting the P11D forms to HMRC by the 6 July each year, following the end of the tax year on 5 April.

The form must include the value of the benefits provided to each employee, as well as the amount of tax and NICs due on those benefits.

There are a number of different methods for valuing benefits, depending on the type of benefit. For example, the value of a company car is based on the car’s list price, while the value of private health insurance is based on the cost of the premiums.

Steps to take:

Identify all benefits in kind provided to employees throughout the year.
Accurately assess the value of these benefits in line with HMRC guidelines.
Ensure timely completion and submission of P11D forms to avoid penalties.

Communicate with employees

Make sure to communicate with your employees during the year-end process.

Ensuring that employees are aware of necessary actions, such as updating personal details, and informing them about when to expect their P60, is fundamental.

Remember, your employees might be relying on you to fulfil their own obligations (e.g. as reporting other income for a self-assessment).

Our tips:

Provide clear instructions and deadlines for any required employee actions.
Offer channels for employees to ask questions or chase up issues.
Use this time to gather feedback on the payroll process to identify areas for improvement.

Final thoughts on payroll year-end

Handling payroll year-end can be tricky, but it’s totally doable with a little planning, attention to detail, and some good communication.
Not only does this keep you in good standing as an employer, but it also sets you up for success in the year ahead.

If you’re looking for expert assistance to navigate the complexities of payroll year-end, Stapletons Accountants is here to help.

Contact Stapletons Accountants today to ensure your payroll is in expert hands, allowing you to focus on what you do best – running your business.