The end of the Tax Year is rapidly approaching and with an increasing number of businesses using Xero Payroll as an integrated part of their on-line financial management, we thought it would be useful to reproduce the year end guidelines from Xero.
So, first things first. Give yourself time. Unless you’re one for doing things in a hurry and working up a sweat, then, free up your calendar, grab a coffee and follow the steps below before processing your final pay run or pay runs for 2017-2018.
Step 1: Review your opening balances
This relates to both the company and your employees. You’ll need to make sure any required opening balances have been entered into Xero to ensure all year to date figures are reported correctly. You will need opening balances if:
A)You transferred over to Xero part way through the tax year
B)You had any new starters part way through the tax year with a P45
Step 2: Review your payroll settings and reconciliation
Click into your payroll settings to review all the information that impacts your payroll reporting. If anything is incorrect you can update this before processing your final pay run.
To help you with this, click on the following links to check your payroll settings and carry out a year-end reconciliation. Keep this link handy as you’ll also need to refer back to this to reconcile your final pay run for the tax year.
Step 3: Process your final pay run
This is the same process you have been doing throughout the tax year, by clicking into Payroll > Pay Runs. If you don’t have any payments to make for the final period of the tax year, then you can post a NIL pay run.
Be careful with your payment date here. For this to be reported as the final submission of the tax year, your payment date will need to fall in month 12 (March 6 – April 5).
While this final Pay Run is in draft, it’s a good idea to have a look at your employees’ payslips to confirm year-end figures are correct.
Please remember to post your final pay run by April 19. Xero will automatically send an EPS (Employer Payment Summary) by April 19, which will inform HMRC that it’s your final submission of the year – easy peasy!
Step 4: Download your employees’ P60s and P11s
Now that your final submission has been sent, you can download your employees P60s. It is your duty as an employer to provide your employees with these reports by May 31. Please remember the P60 report will only display the total taxable earnings to date, this is something to look out for if the figures on here don’t match the year to date figures on your employees’ payslips. You can generate the P60 and P11 reports by following these instructions.
Step 5: Review your employees’ tax codes for the new year
Our Product team are on the ball and have already made provisions to uplift all employee tax codes ending in L, M, and N for 2018-2019. They will also update any Week1/Month1 indicators to Cumulative. We’ll let you know once this has been done so you can review these changes. All other tax codes will be carried over from last year and will need to be uplifted manually within the employees’ records.
While you’re in the employees’ records, it’s also a good idea to review their NI categories.
Step 6: Review employment allowance and directorship settings for the new tax year
If you were already claiming the Employment Allowance in the previous tax year, then the new annual balance of £3000 will automatically apply for 2018-2019.You can review these settings if you still wish to claim the allowance to ensure this indicator has been selected in the Payroll Settings.
Now that we are starting a new tax year, you may wish to review/amend the NI Calculation method for your Directors. Find out how to review both of these settings here.
Step 7: Pension contribution uplifts
Tax codes aren’t the only thing that need to be uplifted for this new tax year. You will need to review the pension contributions too. Your pension provider can provide you with these uplifted values. Then, all you’ll need to do is overwrite the existing detail within the Payroll Settings > Workplace Pension tab. You’ll want to review the employee Pay Templates to ensure these new values are displaying here before you process your pay run for the new tax year.
If you’re connected to your pension provider through Xero for automatic submissions, you’ll need to make these changes directly with your provider. You can then Refresh your Scheme details in Xero to pull these changes through.
Running payroll year end shouldn’t be a difficult process provided you are methodical in approach. If you need any help on Xero, Payroll or year-end please contact our Xero Certified Team on 0345 177 5500, through your local office, or use our on-line contact form.