The new payroll year starts on the 6th of April 2021. The most common question I'm being asked right now is: "What do I need to do to prepare my payroll for the first pay run of the tax year?" Well, there are a number of things you need to remember ...
First, and probably most important, make sure that you have closed the previous year successfully and processed your last pay run in March. You should be able to print P60s in Xero and review your pay for the year by looking at the P11 reports. These summarise the years pay and you don't need to send a P60 to anyone who left in the previous tax year who has had a P45 leavers form.
Now, go to the HMRC page in your Payroll Settings and, if eligible, check the boxes for 'Small Employers Relief' and 'Employment Allowance'. To check if you are eligible this year, double-check the latest thresholds on the HMRC website. For Small Employers Relief click here as this is based on your national insurance bill in the previous year. For Employment Allowance click here.
Next up, review your employees' National Insurance categories. If an employee has 'come of age' or reached retirement age and kept working, their code may have changed. You can see a list of the current codes here.
These are the key dates to remember for your payroll obligations:
- 5th April - The end of the tax year
- 19th April - End of the tax year filing deadline
- 31st May - Deadline to provide employees with P60s
- 6th July - Deadline to report Benefits (P11D(b))
Time to update your employees' tax codes. If you have anyone with the 'Week 1 Month 1' box ticked in the last pay run in the previous year, you should untick the box before the pay run in the new year.
Anyone with an L, M, or N code will have their tax code go up by 7 this year. Watch out for any tax code change notifications you may have been sent. I received a couple in February dated the 6th of April so need to enter those changes before processing the first pay run for this year.
Next, review any student loans, Scottish employees may have a new Plan 4 student loan to pay back so double-check for those changes too. Also remember that the National Living Wage/National Minimum Wage has not only changed, but the age thresholds have changed too, See my previous post for more details.
The auto-enrolment pension percentages are staying the same, but it is worth just checking that everyone is on at least the minimum of 5% employers and 3% employees if they have not opted out.
I know many companies who started auto-enrolment when it first came out for small companies in 2016 will also have their 3-year re-enrolment anniversary soon, so be aware when your re-enrollment date is for your company.
If anything I've written here resonates with you, call me on 01604 420057 and let's see how we can help you.