Payroll Housekeeping

It’s not always that straight forward or easy for employers to navigate their way around HMRC guidance. Most of the time you just want a straightforward answer to a question without having to trawl through a minefield of guidance before you find an answer to your question.

Most of the time you give up searching as one link requires you to click on another and so it goes on!

So, with that said, here are a few pointers or reminders on payroll housekeeping reviewing some of those basic payroll rules, and reviewing what has changed.

New starters

Whilst the inception of Real Time Information removed the need for employers to send a P45 to HMRC, the form must continue to be issued to a departing employee, and conversely, when a new starter commences in a new job this form should be handed to the new employer.

The next stage is to check the details:

The leave date is on the P45. If dated in the previous tax year, the usual guidance from HMRC is with reference to the start date being between 6 April and 24 May. In this scenario, where the tax code has the suffix letter L, N, or M, the tax code should be uplifted by the relevant points associated with the increase to the Personal Allowance and used.

For the 2022/23 Tax Year, given there are no increases to the Personal Allowance, employers should continue to use the tax code as notified on the P45.

If the start date is after 24 May, the declaration from the starter checklist should be used to determine the appropriate tax code and this should be applied. This will be picked up by HMRC through RTI and any corrections sent back to the employer.

Employers should take note of any student loan indicator confirmed in box 5 of the P45 and ask the employee to confirm which plan type they are repaying under. In these circumstances, evidence of this must be obtained through the completion of the starter checklist.

However, if the student is unsure of which plan they are repaying under, then the default Plan type 1 should be applied whilst waiting for HMRC to confirm the correct Plan on receipt of the first FPS from the new employer.

Where the P45 is for the current tax year, the previous pay and tax details should be checked, and the correct previous pay and tax details should be added to the payroll record if the coding is cumulative.

Tax codes BR, 0T, D0 and D1, remain unchanged.

Where no P45 is provided, the employee must complete the starter checklist and declare the statement that appropriately describes their employment status, which the employer assesses to determine the correct tax code.

Full Payment Submission (FPS)

Where no P45 is provided by the new starter and the relevant declaration is submitted on the FPS  from the starter checklist, only use any tax code or previous pay or tax changes received directly from HMRC.

Previously, where a P6 had been issued by HMRC after the submission of the FPS and before receipt of the P45, the employer is required to ignore the P45 and only update any student loan details.

For 2022/23, where the starter checklist is used to add the employee onto your payroll records and the P45 is received after submitting the first FPS, the previous pay, tax, or tax code should not be updated on the payroll software, and you should only update student loan details (if applicable).

P6 forms

Be vigilant with P6 notices. If received after the submission of the FPS with amending pay and tax details, the payroll records should be updated. If more than one P6 is received always action the one with the latest date.

On occasion where HMRC discover an error in previously advised pay and tax details they will send an amending P6 notice to correct this. The result of which could lead to zero pay in the earnings boxes. This is still a numeric adjustment, and the payroll record should be amended to reflect this. If left blank this would indicate that no action is necessary. However, it is advisable to check with HMRC if you are unsure as in some cases this is leading to confusion for some employers on how to interpret this information.