Year end Payroll

Payroll year end is nearly here
Since 6 April 2013 employers have been operating RTI – this means they are reporting to HMRC in real time. In theory, this will make Payroll Year End a lot simpler than it has been in previous years.
You must now set up payroll records using payroll software, some of which is free. If you are a small employer you can use HMRC’s Basic PAYE Tools, which is designed for employers with nine or fewer employees.
For a list of free payroll software, click here. www.hmrc.gov.uk/softwaredevelopers/paye/rti-software-forms.htm
To download HMRC’s Basic PAYE Tools, click here. www.hrmc.gov.uk/payerti/payroll/bpt/paye-tools.htm
All employees must be set up on your payroll, even those earning below the £111 per week NIC’s Lower Earnings Limit (2014-15) and those paid just once a year.
Accuracy is key
When transferring personnel details to a new payroll system, you must make sure that you accurately enter the details. If it is wrong it will cause you and HMRC problems, and may affect your employees too.
For more information on transferring your employees to the Basic PAYE Tools, you can download HMRC’s three step guide here. www.hmrc.gov.uk/payerti/payetoolshelp/switching-to-rti.pdf
Income Tax and National Insurance rate changes
As well as making sure you have RTI enabled software you need to update your payroll software to reflect rate changes that apply from 6 April 2014.
If you use commercial software, your supplier will send you a software update for rate changes. You can read more in our year end guides for Sage and Iris.
After 6 April 2014, you must ensure that your payroll calculations for Income Tax and NICs are done using the following 2014-15 rates and thresholds:
PAYE tax threshold (2014-15)

£192 per week
£833 per month
£10,000 per year
Basic tax rate
20% on annual earnings above the PAYE threshold and up to £31,865
Higher tax rate
40% on annual earnings from £31,866 to £150,000
Additional tax rate
45% on annual earnings above £150,000
Emergency tax code
1000L
Class 1 NICs: Thresholds (2014-15)
Lower earnings limit (LEL)
£111 per week
£481 per month
£5,772 per year
Primary Threshold (PT)
£153 per week
£663 per month
£7,956 per year
Secondary Threshold (ST)
£153 per week
£663 per month
£7,956 per year
Upper accrual point (UAP)
£770 per week
£3,337 per month
£40,040 per year
Upper earnings limit (UEL)
£805 per week
£3,489 per month
£41,865 per year
The basic rates for NICs category letter A, up to the Upper earnings limited are:
Employees 12%
Employers 13.8%
The rates vary depending on the NICs category letter, and level of earnings. You should always ensure that you are using the correct letter and rate by checking the HMRC website.
If you are unsure please feel free to contact us, we would be happy to help.
Tax code changes
Most employers will receive notification of tax code changes online rather than in the post. Your payroll software should allow you to read these notices directly, however you can also access them by:

• Logging onto PAYE Online and choosing the ‘tax code notices’ option
• Using the PAYE Desktop viewer (PDV) which can be downloaded and installed from the HMRC website

If you have previously opted out of receiving tax code changes online, you will still receive them by post. You can opt back in at any time.
Form P9X – this tells you about tax codes to be used from 6 April due to changes in Income Tax and NICs rates. This will be used along with the employee’s tax code from the previous tax year’s record.
Form P9(T) – this will tell you if an individual’s tax code changes from 6 April. You won’t receive a P9(T) for each employee – only those you need to use a new code for.
Form P6 – this can be issued at any time of the year, and will give you the employee’s new tax code, as well as a date to start using it.
Form P7X – this tells you about changes in tax codes following the budget.
If you receive a tax code after the date you are required to use it from, you should contact HMRC.
If you are using commercial software or HMRCs Basic PAYE Tools you should follow the instructions on your tax code form to update an employee’s records.